Indirect tax news from the past week
Titanium: landlord not established for VAT by merely owning property – CJEU
Titanium Ltd, based in Jersey, owned two commercial properties in Austria which it leased to Austrian businesses. The lease was subject to VAT (as a land-related supply), but a disagreement arose over whether VAT should be accounted for by Titanium or by the lessees. The reverse charge potentially applies to supplies by non-established businesses, so if Titanium had a fixed establishment in Austria by virtue of owning the property then it should have charged VAT. However, Titanium did not employ any staff in Austria, and engaged a local property management company to deal with day-to-day operations. It retained control over any important decisions (agreeing leases, authorising repairs or improvements, and appointing the management company), but none of these required it to have a presence in Austria. The CJEU has ruled that the property on its own could not be a fixed establishment, as an establishment requires both human and technical resources. The only questions referred to the CJEU related to identifying an establishment, and it did not therefore provide any further guidance on the operation of the reverse charge in this case. (Contact: Judith Lesar).
Moulsdale Properties: circularity in disapplying the option to tax – CS
The Court of Session’s judgment in Moulsdale Properties addresses a circularity in the option to tax disapplication provisions. Mr Moulsdale sold a property (which was leased to one of his Optical Express companies) to a third party (Cumbernauld). If he had intended to charge VAT, then the property would have become a capital goods scheme item for Cumbernauld, and Mr Moulsdale’s option would have been disapplied. In which case, he should not have charged VAT. However, if he had not therefore intended to charge VAT, and Cumbernauld would not have had a CGS item, then the option would not have been disapplied; and Mr Moulsdale should have charged VAT. The majority of the Court of Session ruled that there was insufficient evidence of Mr Moulsdale’s intention, and concluded that the FTT and UT had been right to dismiss his appeal – Mr Moulsdale should have charged VAT on the sale of the property. This meant that the appeal was settled without having to resolve the circularity of the rules, which were criticised by Lord Menzies as “unnecessarily convoluted”, and which produced an outcome which Lord Doherty (who ruled in Mr Moulsdale’s favour) thought seemed “arbitrary and absurd”. (Contact: Richard Smith).
Apcoa Parking: car park fines subject to VAT – AGO
Apcoa Parking Danmark A/S operated car parks on private land under agreements with site owners. It set the conditions for using the car parks, and imposed a €69 “control fee” if drivers did not comply with them. In the Opinion of AG Jean Richard de la Tour, such fees were subject to VAT. Case law treating retained deposits as outside the scope of VAT depends on the non-performance of any service, and was not applicable in this case because the drivers who incurred the fines used the car parks. A more appropriate comparison was between car parking fines and charges for the early termination of telecoms contracts, which are subject to VAT. Apcoa argued that the control fee was out of all proportion with the normal charges for parking. However, the AG observed that the drivers had a free choice whether or not to incur the control fees (they could return to their vehicle on time, park in the marked bays, etc.), and it made sense for the fees to be high because of the cost of enforcing them. There was therefore, in his opinion, a direct link between the control fees and the provision of parking. Apcoa’s claim for VAT of €3.37m on the control fees should therefore be rejected. (Contact: David Walters).
Plastic Packaging Tax: HMRC policy and guidance papers
HMRC have issued a policy paper titled Get your business ready for the Plastic Packaging Tax, and an accompanying guidance paper titled Further information for businesses, providing more details on Plastic Packaging Tax (PPT). The tax, which will take effect from 1 April 2022, seeks to encourage the use of recycled rather than new plastic within plastic packaging, and it is hoped it will in turn stimulate increased levels of recycling and collection of plastic waste, diverting it away from landfill or incineration. It will apply to plastic packaging manufactured in, or imported into, the UK where the plastic used in its manufacture is less than 30% recycled. The rate of the tax will be £200 per metric tonne of plastic packaging. Businesses that manufacture or import ten or more tonnes of plastic packaging over a 12-month period will need to register and account for the tax, although record keeping requirements will extend to all businesses that manufacture or import plastic to some degree. The online service to register for PPT and pay any liabilities will be available on 1 April 2022 when the tax takes effect, and more detailed guidance will be published later in the year. (Contact: Tom Shaw).