Weekly VAT News

H Ripley & Co Limited: Export evidence – UT

In 2016, H Ripley & Co Limited (HR) sold scrap metal to Recylink International, which it treated as zero-rated supplies on the basis that the goods were removed to Belgium. In 2017, HMRC assessed HR for VAT on the basis that evidence put forward to show the scrap metal was removed from the UK was insufficient to meet the conditions and time limits regarding proof of evidence of removal as set out in VAT Notice 725. The documents held by HR included sale invoices, bank statements, weighbridge tickets, international consignment notes (CMRs), e-mails, and WhatsApp messages. HR also obtained P&O boarding cards, albeit more than 18 months after the transactions took place. The First-tier Tribunal refused HR’s appeal against HMRC’s assessment, and the Upper Tribunal has upheld the FTT’s decision. The UT agreed with HMRC and the FTT that the issue in point was whether HR held sufficient evidence of removal, and not whether the goods were actually removed. Whilst it was common ground that there was no single document that in itself proved that the goods were removed from the UK, HR argued that the FTT failed to consider whether the documents, when considered together, established its case. The UT upheld the FTT’s conclusion that, due to various deficiencies, the documents, when considered in combination, did not evidence the scrap metal’s removal from the UK. The UT also upheld the FTT’s decision to exclude evidence obtained after the three-month time limit, which is set out in VAT Notice 725 and has force of law, in particular the P&O boarding cards, whilst noting that the FTT had concluded that this evidence would not have made any difference to its findings. HR failed to satisfy the conditions for zero-rating, and the UT dismissed HR’s appeal. (Contact: Andrew Clarke)

Högkullen AB: Valuation of intra-group charges – CJEU

Högkullen AB was the parent company of a Swedish real-estate management group. Högkullen’s subsidiaries were partially VAT exempt, and unable to fully recover input tax. Högkullen supplied management services to its subsidiaries, for which it invoiced approximately SEK 2.3 million in 2016, calculated on a ‘cost-plus’ basis. Högkullen incurred shareholder and fund-raising costs, which it did not take into account when calculating the intra-group charges. The total costs incurred by Högkullen in 2016 were approximately SEK 28 million. To the extent these costs were subject to VAT (about half of the amount), Högkullen fully recovered the input tax. Under the EU Principal VAT Directive, EU member states may value a supply at open market value (OMV) where a supplier and recipient have close ties, the consideration is less than the OMV, and the recipient is not able to deduct input tax in full. The OMV is the amount payable on the open market for a comparable service, but where this cannot be ascertained, it is an amount not less than the full cost to the supplier of providing the service. The Swedish tax authorities considered that Högkullen’s intra-group supplies constituted a single supply, the consideration for which was less than the OMV. Therefore, as there was no comparable price on the open market, the OMV would be at least equal to the full cost incurred by Högkullen of providing the service. The CJEU has held that the tax authorities could not assume that a parent company making supplies of active management services to its subsidiaries was making a single supply thereby precluding the OMV of those services from being determined using a comparison method. With respect to the question of whether the totality of costs incurred by Högkullen, including the shareholder and fund-raising costs, should be included in calculating the OMV, the CJEU considered that this was based on the premise that in the case of active management by a parent there are no comparable services. Given the CJEU’s findings, it concluded that it was not necessary to address this issue. (Contact: Nicole Faith)

RCB 5 (2025): Update on the treatment of cooking alcohols for alcohol duty

HMRC have published Revenue and Customs Brief 5 (2025) on the application of alcohol duty for certain cooking alcohols with 5% alcohol by volume (ABV) or less. Following a recent First-tier Tribunal decision (Gourmet Classic Limited), HMRC have changed their policy on the treatment of certain cooking alcohols, being alcoholic products to which salt or seasonings have been added, making the product unsuitable for consumption as a beverage. The FTT found that such products are food, and therefore eligible for the alcohol ingredients relief (AIR) scheme, which provides for repayment of alcohol duty for foods with no more than 5 litres of alcohol per 100 kg of final product. Businesses importing such cooking alcohols with an ABV of 5% or less into the UK will not need to pay alcohol duty, and duty will not be payable when such goods leave an excise warehouse. If qualifying cooking alcohols are produced in the UK from duty paid alcohol, that duty can be reclaimed under the AIR scheme. (Contact: Eleanor Caine)

CJEU VAT case calendar

On 10 July, the CJEU will deliver its judgment in Konreo on a recipient’s liability for an insolvent supplier’s VAT. Also on 10 July, there will be Advocate General opinions in Vaniz, also concerning joint and several liability, and in the joined cases of Agrupació de Neteja Sanitaria and Educat Serveis auxiliars on the application of the cost sharing exemption in Spain.

Dbriefs webcast

On Tuesday 8 July at 12.00, the UK Tax Update – July webcast will cover the latest UK tax developments, with updates on news in corporate, employment and indirect tax.

Deloitte European VAT Refund Guide 2025

The 2025 edition of the Deloitte European VAT Refund Guide is now available. Businesses operating in countries in which they are not VAT-registered can incur significant amounts of VAT on expenses paid in those countries. The VAT Refund Guide covers the rules and procedures on how to claim a VAT refund in 32 European countries.