Indirect tax news from the past week
Plastic Packaging Tax: draft regulations and guidance
The government is consulting on draft regulations concerning the introduction of Plastic Packaging Tax (PPT) from 1 April 2022. The regulations set out how PPT will be administered and provide details on registration, returns and record keeping. The regulations also address methods for weighing plastic packaging components and calculating recycled material in plastic, and the definition of “substantial modification”, which determines when a plastic packaging component is finished and becomes chargeable for the tax. HMRC have published new guidance on PPT, including how to work out what packaging is subject to PPT; whether, when, and how to register companies or groups for PPT; and how to claim a credit or defer PPT if packaging is to be exported. (Contact: Tom Shaw).
Finance (No.2) Bill 2021: Notification of Uncertain Tax Treatment
Schedule 15 of the Finance (No.2) Bill sets out amended rules for the Notification of Uncertain Tax Treatment (NUTT). The revised version addresses some of the concerns raised in relation to a discussion draft of the legislation published in August. In particular, uncertainty is no longer defined by reference to whether there is a “substantial possibility” that a tribunal would disagree with a VAT treatment (as announced in the Budget). Businesses only need to consider whether they have followed HMRC’s “known position” at the time they submit their VAT returns, and will not be under a continuing NUTT obligation to consider how changes in guidance might affect historical VAT returns. The bill also attempts to ensure that the deadline for notifying a VAT uncertainty based on an accounting provision does not come before the accounts have been filed. There are still various complications that can arise in relation to NUTT and VAT, which we will be considering in a Dbriefs webcast on 16 November. (Contact: David Walters).
Mainpay: no VAT exemption for temporary consultant haematologists – UT
Mainpay, an umbrella company, provided the services of temporary medical consultants and GPs to an employment business, that provided them to NHS Trusts. In Adecco, the Court of Appeal established the importance of who controls temporary staff in considering how VAT should be accounted for. In Mainpay, the Upper Tribunal has now ruled that “control” does not necessarily mean control of the services being performed. Neither Mainpay, nor the employment business, nor the NHS Trust, was in a position to control the clinical decision-making of a specialist such as a consultant haematologist. The UT ruled that the FTT had been correct to consider the wider framework of control: although Mainpay employed the consultants, it had no contract with them as to medical matters, was not involved in any aspect of their day-to-day work, and was not involved in complaints against them. The UT confirmed that Mainpay was providing the consultants rather than the medical services that they performed, and could not therefore exempt its services as supplies of healthcare. (Contact: Tammy Arendse).
X: VAT on deferred estate agent commission – CJEU
In 2012, X GmbH arranged the sale of real estate belonging to T GmbH, for which it was paid €1m. Payment was spread over five equal annual instalments of €200k, and X considered that it should account for VAT when it was paid. However, in the CJEU’s judgment, X had to account for VAT in full when its services were performed (i.e. at the time the property sale completed). VAT can be deferred if services are performed continuously over a period of time. However, that rule only applies when the nature of the service means that payment would naturally be made by instalments. It allows a tax point to be identified, where it might otherwise be difficult to pinpoint the time of performance. In this case, no such uncertainty existed. The CJEU also ruled that bad debt relief only applied to the non-payment of debts for which a customer was liable. X was not entitled to BDR, as T had not defaulted on any payments. X had agreed to being paid by instalments over five years, but this did not affect the time of supply for VAT purposes, and meant that X had to pre-finance the VAT on its services. (Contact: Laura Fallon).
Dbriefs: Changes to the UK Border Operating Model: Are You Ready For 2022?
There is a Dbriefs webcast on Thursday 11 November 2021 at 12.00 GMT/13.00 CEST. Changes To UK Border Operating Model: Are You Ready For 2022? will be hosted by Caroline Barraclough. Our panel will discuss the upcoming 2022 changes to HMRC's current Border Operating Model and customs declaration process and what your organisation needs to know to be prepared. Click here to register.