Weekly VAT News

Weatherford Atlas Gip SA: VAT on intra-group services – CJEU

In June 2016, Weatherford Atlas Gip, part of the Weatherford group of companies (the group) which specialised in oil services, acquired Foserco SA, a Romanian company, and another member of the group. Prior to its acquisition, Foserco had acquired general administrative services from companies in the group, such as information technology, human resources, marketing, accounting, and consultancy services. Other companies in the group also received the services, with each group entity receiving a charge for their share of the cost of the services supplied. The services were supplied by entities established outside Romania, and Foserco accounted for VAT under the reverse charge. The Romanian tax authorities considered that Weatherford Atlas Gip (which had taken over Foserco’s obligations) was not entitled to deduct input tax in respect of the administrative services, on the basis that it had not established a link between the services and its taxable transactions. The tax authorities considered that it was not possible to establish such a link, as the services were provided to several companies in the group and therefore benefited other group members or the group as a whole. The CJEU has held that the tax authorities may not deny a taxable person input tax recovery for the acquisition of services from other taxable persons belonging to the same group of companies on the grounds that those services were also supplied to other companies in the group, provided the services were used by the taxable person for the purposes of its own taxable transactions (something for the referring court to establish). It was not relevant that the services were also provided to other group entities, provided the allocation of costs corresponded to the services acquired by each entity for the purposes of its own taxable transactions. The CJEU also considered that, contrary to the argument of the tax authorities, it was not relevant whether the services were necessary or appropriate, as the EU Principal VAT Directive “does not make the exercise of the right of deduction subject to a criterion of the economic profitability of the input transaction”. (Contact: Nicole Faith)

Warehousekeepers and Owners of Warehoused Goods Regulations

In 2023, HMRC undertook a consultation on the Warehousekeepers and Owners of Warehoused Goods (WOWGR) Regulations 1999 as part of a programme of excise duty simplification and modernisation. Following the consultation, HMRC have concluded that weaknesses identified in WOWGR and controls introduced by the Alcohol Wholesaler Registration Scheme (AWRS) have reduced the rationale for WOWGR, and that its value as an anti-fraud measure has diminished. Accordingly the Excise Duties (Miscellaneous Amendments and Revocations) Regulations 2024 have been made to simplify the WOWGR scheme, including removing the requirement that revenue traders may only store goods in an excise warehouse for longer than 72 hours if they are an authorised warehousekeeper, are a registered owner, or have a duty representative. The Regulations also make consequential amendments to other legislation, including in relation to freezones, and make a number of other amendments to excise duty rules, including for export shops. The regulations relating to WOWGR and freezone changes come into force on 3 March 2025, with the other changes coming into force on 23 December 2024. (Contact: Eleanor Caine)

UK accession to CPTPP – update

On 29 November 2024, Douglas Alexander MP (Minister for Trade Policy) issued a written ministerial statement providing an update on the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The statement confirmed that the UK will accede to the CPTPP on 15 December 2024, and that the Agreement will come into force on that date with Brunei, Chile, Japan, Malaysia, New Zealand, Peru, Singapore, and Vietnam. The Agreement will enter into force with Australia on 24 December 2024, following Australia’s recent ratification of the UK’s accession. For an assessment of CPTPP’s content and potential implications for UK businesses, please see this Deloitte article, from when the UK signed the Agreement in 2023. (Contact: Henry Morris)

This week’s CJEU VAT calendar

On 19 December, the CJEU will deliver its judgment in Foreningen C on VAT on a statutory media licence fee. Also on 19 December, there will be Advocate General opinions released in Határ Diszkont on the VAT treatment of the administration of a tourist VAT refund scheme and in Finanzamt Österreich II on the correction of VAT incorrectly charged to consumers.

Compliments of the season

This is the last edition of Weekly VAT News for 2024 – the next issue will be published on 6 January 2025. We wish all our readers a very Merry Christmas, and a Happy New Year.