Weekly VAT News

Bollinway Properties Limited: repayment supplement following assignment of input tax credit – UT

In 2018, Acepark Ltd bought Toys “R” Us Properties Ltd (TRUP) and transferred its properties to a new company, Bollinway Properties Ltd, for £355m. Bollinway included an input tax credit of £71m in its 10/18 VAT return which it filed on 2 November 2018, and suggested to HMRC that this should be offset against TRUP’s corresponding output tax liability. HMRC requested a full set of backing documents, and were provided with various invoices, option agreements, and notices. However, Bollinway did not send copies of the property transfer forms (TR1) until 18 December 2018, whereupon HMRC promptly offset the input tax as requested. The Upper Tribunal considered that the TR1s were important documents as they proved that the transfers of the properties had in fact taken place, although the VAT invoices might have established the time of supply. In its judgment, especially given the high barrier to interfering with the First-tier Tribunal’s findings of fact, the FTT had been entitled to conclude that TR1s should have been provided as part of the full set of backing documents, and HMRC had been entitled to wait for them before processing Bollinway’s repayment. Consequently, HMRC had not delayed the repayment for over 30 days, and Bollinway was not entitled to repayment supplement (which applied for the period in question) of £3.5m. (Contact: David Walters)

Bolt Services UK Limited: application of TOMS to ride-hailing services – FTT

The First-tier Tribunal has held that Bolt Services UK Ltd should account for VAT under the Tour Operators’ Margin Scheme (TOMS) on the supply to passengers of private hire vehicle ride-hailing services (‘the supply’). The FTT considered that for the supply to fall within TOMS, it had to be of a service commonly provided by travel agents/tour operators, and the main focus at the hearing was on this issue. Bolt argued that the services commonly provided by travel agents/tour operators were evolving as the travel industry and technology evolved. Bolt contended that, looking at the development of CJEU case law, it would be a natural next step for the courts to include the supply as one commonly provided by travel agents/tour operators. Conversely, HMRC argued that Bolt is not a tour operator/travel agent and that its supplies are not commonly provided by tour operators/travel agents. The FTT held that the correct approach, when assessing whether Bolt’s services are those commonly provided by tour operators/travel agents, is to take a high level or general view when considering whether services are of a kind commonly provided by tour operators/travel agents. The approach of the CJEU “suggests that it is not necessary for the tribunal to descend into the detail of the services”. The FTT found that the supply is a service commonly provided by tour operators/travel agents, therefore allowing Bolt’s appeal. (Contact: Donna Huggard)

TP v Administration de l’Enregistrement, des Domaines et de la TVA: VAT treatment of directors’ fees – CJEU

The CJEU has ruled that the provision of services by a non-executive director to public limited companies in Luxembourg should not be subject to VAT. TP’s fees were typically set at a shareholders’ meeting, either as a percentage of the company’s profits or a lump sum. The CJEU considered that TP was probably carrying on an economic activity for VAT purposes (although perhaps not if the profits were very small and his percentage fee was nominal; and possibly only if a lump sum were determined in advance). However, TP should not be seen as independent from the company. He might appear to act in his own name when presenting advice or proposals to the board and when voting, but he would be acting for the board (and, more generally, for the company) in respect of that advice, those proposals, and those votes. Therefore, TP as a non-executive director would be acting in the interests of and for the company. The CJEU also noted that TP’s fees were not directly impacted by decisions he made as a board member and that his activities did not expose him to a risk of loss if the company performed poorly. Even though he might be free to arrange how he performed his work, TP should not be seen as independent of the company, and therefore should not charge VAT on his fees. (Contact: Tim Churchill)

UK CBAM to be introduced by 2027

In March 2023, the government published a consultation on addressing carbon leakage to support decarbonisation, seeking views on “potential policy measures to mitigate carbon leakage risk in the future and ensure UK industry has the optimal policy environment to decarbonise”. Potential policy measures included the introduction of a UK carbon border adjustment mechanism (CBAM). The government has now published a summary of consultation responses and government response, and has announced that it will implement a CBAM by 2027. Certain goods “imported into the UK from countries with a lower or no carbon price will have to pay a levy by 2027, ensuring products from overseas face a comparable carbon price to those produced in the UK”. The CBAM would apply to certain carbon-intensive goods in the following sectors: iron, steel, aluminium, fertiliser, hydrogen, ceramics, glass, and cement, with the importer of the goods responsible for meeting CBAM obligations. There will be further consultation on the design and delivery of the CBAM in 2024. The UK CBAM will interact with the UK emissions trading scheme (ETS), and consultations on proposed changes to the UK ETS have also been recently launched. (Contact: Zoe Hawes) 

HMRC ‘one-to-many’ campaign – payment processing providers

The Association of Taxation Technicians (ATT) has reported that, as part of a ‘One to Many’ campaign, “HMRC are writing to businesses which use Payment Processing Providers (PPPs), asking them to ensure they correctly account for amounts received and fees charged in respect of these services, and to correct any tax compliance errors identified”. The ATT reports that the intention is “to help businesses understand that PPPs may deduct their fees in different ways, and to ensure their financial reporting systems report the correct amounts for VAT and either Corporation Tax or Income Tax”. The ATT has shared template versions of the HMRC letters for small, mid-sized, and large businesses. (Contact: Andrew Clarke)

This week’s CJEU calendar

On 11 January, the CJEU will deliver judgments in HPA - Construções, on the reduced VAT rate for repair and renovation, and Global Ink Trade, a review of a finding of evasion.