Constable VAT Focus 12 November 2020


Customs, VAT and Excise UK transition legislation from 1 January 2021
This collection brings together Customs, VAT and Excise EU Exit legislation and Customs notices that have the force of law applicable to UK transition.

Prepare to import goods from the EU to GB from 1 January 2021
HMRC has released useful step-by-step guidance to assist businesses which, after the end of the transition period, will continue to bring goods into GB from the EU. Businesses and Charities in England, Wales and Scotland need to complete the following actions to continue importing from EU countries from 1 January 2021.

Prepare to export goods from GB to the EU from 1 January 2021
HMRC has issued detailed step-by-step guidance to assist businesses which, after the end of the transition period, will continue to ship goods to the EU from GB. Businesses in England, Wales and Scotland need to complete the following actions to continue exporting to EU countries from 1 January 2021.

List of customs agents and fast parcel operators
From 1 January 2021, many businesses will require a customs agent in the UK. HMRC has provided a list of customs agents and fast parcel operators who can assist with the submission of customs declarations.


As the end of the Brexit transition period draws closer, it is essential that businesses stay up to date with ongoing developments. We continue to update our coverage of Brexit and how VAT and business will be impacted. The situation is still not perfectly clear; however, there are important steps which businesses should be taking as a matter of urgency if they have not yet done so. Our coverage can be read in full here.

We have also recently released a blog which discusses deferred VAT payments owing to COVID-19 and how they interact with businesses including scenarios such as joining a VAT group registration or deregistering for VAT. This will be of interest to any business which is considering changing its operations and has deferred VAT payments throughout the pandemic. Read in full here.

Some readers may also be interested in our coverage of the recent decision in the Mid Ulster District Council VAT case which considered the VAT liability of charges made by local authorities to the public for access to sports and leisure facilities in Northern Ireland. HMRC contended that the charges should be VAT exempt following the London Borough of Ealing case, after which HMRC accepts that the sporting exemption applies to such charges. The local authorities disagreed and suggested that the charges are outside the scope of VAT.


First Tier Tribunal

1. VAT Liability of Pitch Hire

This case considered Netbusters UK, a company which organises various football and netball leagues and the associated supply of pitches for those games to take place. It argued that its supplies were VAT exempt, HMRC believed them to be standard rated. It enters into agreements with third parties, such as local authorities and schools, to hire venues belonging to those third parties for set periods of time. It then hires those venues to its customers. Usually there is a toilet and changing room at the venue, although not always, and other facilities are not provided.

Netbusters UK had treated supplies of pitches as standard rated but, in 2016, submitted a claim to HMRC for the repayment of overpaid output VAT for 2013-2016 in relation to the supply of pitches. It also began treating its supplies as VAT exempt from 2017 onwards. HMRC refused the VAT repayment and assessed for unpaid VAT for those VAT accounting periods where supplies were treated as VAT exempt. The overall VAT amount in dispute was just over £600,000.

Schedule 9, Group 1, VATA 1994 exempts from VAT the grant of any interest in or right over land or any licence to occupy land other than the listed exceptions, one of which is the grant of facilities for playing sport which is standard rated for VAT. However, Note 16 to Group 1 states that the exception for sports facilities does not apply where the grant of the facilities is for:

(a)a continuous period of use exceeding 24 hours; or

(b)a series of 10 or more periods, whether or not exceeding 24 hours in total, where the following conditions are satisfied—


(i)each period is in respect of the same activity carried on at the same place;

(ii)the interval between each period is not less than one day and not more than 14 days;

(iii)consideration is payable by reference to the whole series and is evidenced by written agreement;

(iv)the grantee has exclusive use of the facilities; and

(v)the grantee is a school, a club, an association or an organisation representing affiliated clubs or constituent associations.

HMRC argued that Netbusters UK’s supplies did not satisfy criteria (iv) and (v) as the supplies it receives from local authorities are properly classified as “permission to use sporting facilities”. In support of this, HMRC submitted that the agreements in place between Netbusters and the third-party pitch providers do not create a tenancy and do not provide for exclusive use of the facilities. As Netbusters does not receive the right to exclusive use of the facilities, it cannot confer that right to another. Further, HMRC argued that Netbusters is not a school, club, an association or an organisation representing affiliated clubs or consistent associations, and neither are its customers.

Netbusters referenced HMRC’s guidance, issued after the decision in Goals Soccer Centres plc which concluded that supplies of pitches by a league management company were VAT exempt, which states that HMRC accepts the decision applies to all businesses who operate in similar circumstances, including traders who hire pitches from third parties such as local authorities, schools and clubs. Pointing to historic caselaw, Netbusters highlighted that what it receives from the third-party providers is a licence to occupy and not something else as HMRC had suggested.

The Tribunal agreed with Netbusters that it was receiving licences to occupy. It also agreed that HMRC’s argument was fundamentally misconceived as the question in hand related to supplies made by Netbusters, not received by it. Therefore, for the purposes of Note 16, Netbusters is the grantor and not the grantee.

HMRC then mounted a new argument which was not contained in its statement of case, stating that the customers of Netbusters, i.e. the grantees, are not schools or associations but individuals and sports teams formed for the purpose of playing in that league. Netbusters claimed that it was unacceptable and unfair of HMRC to introduce a new argument at this stage, especially given as the dispute has been ongoing for four years. Considering the Tribunal rules and previous comments made by judges, the Tribunal refused to hear or rule on that part of HMRC’s argument as there would be clear prejudice to the appellant.

Therefore, Netbusters appeal is allowed and the overpaid VAT should be repaid and the VAT assessments for later VAT accounting periods expunged.

Constable Comment: Previous caselaw states that there is clear prejudice to an appellant in not knowing HMRC’s case and that litigation should not be conducted by ambush. The appellant always has a right to be put in a position where it can properly prepare its case. Introducing this argument during the Tribunal hearing meant that Netbusters had no evidence to hand, nor any time to obtain such evidence, to argue about the status of its customers and so could not respond to HMRC’s argument at all – this would be patently unfair. It will be interesting to see if HMRC appeal this decision to the Upper Tier Tribunal. Organisations making supplies of sporting services may wish to consider the VAT liability of such supplies. Please do not hesitate to contact Constable VAT should you wish to discuss the potential implications of this decision.

2. VAT Mini One Stop Shop

This case concerned Krystal Hosting Ltd (KHL), A UK company which supplies web hosting services across the EU. Through its agent, GrowFactor (GF), it registered for the VAT MOSS scheme in July 2017. It failed to submit its first three MOSS returns on time and, as a result, HMRC cancelled its MOSS registration in May 2018. Following a two-year suspension from the MOSS scheme, KHL re-registered for VAT MOSS.

It now appeals against the original cancellation of its VAT registration in order to enable it to account for the VAT due on its supplies (around £25,000). If the appeal is unsuccessful, KHL will have to account for VAT in each of the EU member states in which it has made supplies at an estimated cost of around £50,000. The basis for the appeal is that reminder notices sent by HMRC were inadequate and so did not entitle HMRC to cancel the VAT registration.

GF has acted as KHL’s agent throughout the entire period. A taxpayer’s agent can access the taxpayer’s online tax account but cannot view HMRC communications sent to the taxpayer. Essentially, KHL argues that it abdicated its responsibilities to GF and, therefore, never received any notification that it had defaulted as GF was not privy to these communications. Whilst KHL received generic emails which stated that it had received an online communication from HMRC, it did not think it could be expected to log into HMRC’s online system itself to check the messages. Instead, it assumed its agent’s silence, following the receipt of that email by KHL to mean that there had been no important communication.

KHL submitted that it receives numerous emails every day in relation to all sorts of different taxes and that, in circumstances where the taxpayer has delegated all of its tax compliance to an agent, such a generic email alerting it that there had been online communication was not sufficient to alert KHL to the existence of an important message.

Responding to this argument, HMRC observed that it is only required to issue reminders to taxpayers regarding overdue VAT returns, it does not require them to have been read. Indeed, this follows the general postal rule of UK law. HMRC further submitted that it was clear that the reminders were received by KHL, even if it declined to read them. It was stressed that, ultimately, the taxpayer is responsible for tax compliance and cannot relinquish all responsibility to an agent.

The Tribunal agreed with HMRC and concluded that KHL had received sufficient reminder notifications from HMRC, all of which had been received by KHL and in time. KHL’s belief that it had no responsibility for its own tax compliance does not excuse it from its obligations. It will now have to account for VAT in a number of EU countries.

Constable Comment: This case is a reminder to businesses that simply appointing an agent does not absolve them of tax responsibilities. Indeed, if a business receives several messages from HMRC and its agent does not contact them regarding anything over several years, one might imagine a reasonable taxpayer wishing to fulfil its obligations would clarify its position with its agent or at least check its HMRC online account periodically. The VAT MOSS is a useful and efficient simplification which, as is demonstrated, can save businesses substantial amounts of money. After the end of the transition period, UK businesses will not be able to report their EU sales of digital services through their current Union MOSS registrations and should consider registering in a different EU member state for Non-Union MOSS to continue supplying digital services across the EU.

This newsletter is intended as a general guide to current VAT issues and is not intended to be a comprehensive statement of the law. No liability is accepted for the opinions it contains or for any errors or omissions. Constable VAT cannot accept responsibility for loss incurred by any person, company or entity as a result of acting, or failing to act, on any material in this newsletter. Specialist VAT advice should always be sought in relation to your particular circumstance.