Weekly VAT News

Thyssenkrupp Materials (UK) Ltd: inward processing relief and bills of discharge – UT

Thyssenkrupp Materials (UK) Ltd (TK) claimed inward processing relief (IPR) on components used to manufacture aircraft. In accordance with its IPR obligations, TK submitted a bill of discharge (BoD) to HMRC each quarter, consisting of a spreadsheet with around 100,000 to 200,000 data points. HMRC issued a demand to TK for customs duties and import VAT on the basis that TK’s BoDs included errors that breached the IPR authorisation requirements, and which meant that TK was not entitled to claim IPR for that period. TK acknowledged that there were errors, and that some data was inconsistent with information in HMRC’s Management Support System (MSS), but argued that the errors were immaterial or de minimis, and appealed HMRC’s demand. The First-tier Tribunal found in favour of HMRC, holding that any error, including a minor or immaterial error, or any mismatch between the BoD and MSS can give rise to a customs debt, and that any single error in a line on a BoD meant that customs duty and import VAT were due on all the goods covered by that BoD. The Upper Tribunal has overturned this decision. The UT considered that an error in a row of a BoD did not invalidate the entirety of the BoD, and did not give rise to a liability to a customs debt for all the goods covered by the BoD. The UT went on to consider whether an error in relation to a specific entry could give rise to a customs debt for the goods covered by that entry. The UT held that inconsistencies between the BoD and MSS data did not result in a breach of the requisite IPR obligations and conditions, as the errors had no effect on the correct operation of the customs procedure, and so did not give rise to a customs debt. Immaterial or de minimis errors in a BoD, including most of the errors identified by HMRC in TK’s BoDs, also did not give rise to a customs debt. TK’s appeal was allowed. (Contact: Donna Hemphill)

VAT Notice 700/1: Who should register for VAT – updated

HMRC have amended their VAT Notice Who should register for VAT to, inter alia, update information for non-established taxable persons (NETPs). Section 4.2 of the notice now includes further guidance on when NETPs are liable to register for UK VAT. In section 9, a NETP is now defined as “any person who does not have a UK establishment”. The guidance explains that HMRC “…would normally consider a company which is incorporated in the UK to have an establishment in the UK as long as it is also able to make [emphasis added] or receive business supplies at its registered business address”, and a statement has been added that “A registered, serviced or virtual office alone is not enough to create a business establishment.” Information has been added on when overseas businesses may not need to register for VAT in the UK, including if their sales are to consumers through an online marketplace. The information for overseas sellers has also been expanded, at section 12. In addition to these changes, which were noted by HMRC in the update section, there have also been other amendments, including the following. Section 3.7 explains that if you think you may be granted exception from registration, the application to register forms still need to be completed, and HMRC will then make a decision on the application for exception from registration. Section 3.9 explains that if HMRC agree to a voluntary registration from an earlier date, that date cannot be changed. (Contact: Andrew Clarke)

Common user charge rates – DEFRA  

As part of the changes to import controls under the Border Target Operating Model, the Department for Environment, Food & Rural Affairs has announced the introduction of a ‘common user charge’ for the commercial movement of animal products, plants, and plant products through the Port of Dover and Eurotunnel. From 30 April 2024, the charge will apply to UK businesses importing consignments of goods that enter into or transit through Great Britain through the Port of Dover or Eurotunnel and are eligible for sanitary and phytosanitary (SPS) checks at a government-run border control post in England. The charge will apply to each commodity line in a common health entry document (CHED), with a maximum charge for one CHED limited to five commodity lines. This means that for medium- and high-risk CHEDs, with a per commodity line charge of £29, the maximum charge will be £145. (Contact: Jeffrie Mann)

This week’s indirect tax case calendar

On 10 April, the Court of Appeal will hear HMRC’s appeal against the Upper Tribunal decision in Hotel La Tour Ltd on the VAT treatment of transaction costs. On 11 April, the CJEU will deliver judgments in Legafact on late VAT registration, Gabel Industria Tessile SpA on recovering overpaid duty from the state, and OSTP Italy on the enforceability of customs debts. There will also be an Advocate General opinion in Syndyk Masy Upadłości A on the transfer by an insolvency practitioner of funds held in the VAT account.