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HMRC Impact Assessment for the Movement of Goods if the UK leaves the EU without A Deal
The impact assessment originally published on 4 December 2018 has been updated to include the impacts on the customs, VAT and excise regulations laid before Parliament in January 2019.
HMRC Impact Assessment for the VAT Treatment of Low Value Parcels
Again, the original impact assessment has been updated.
As the 29 March Brexit date approaches there is still uncertainty around whether there will be any deal in place by then. It is essential that any traders or businesses which may be affected by changes in VAT procedures make plans to ensure a smooth transition.
Businesses trading with the EU need to consider the following:
If goods are moved
- Getting an EORI number
- Registering for simplified import procedures
If electronic services are supplied
- Registering for non-Union MOSS in an EU member state as soon as possible after 29 March if there is no deal.
If goods are supplied to consumers in the EU under distance selling rules
- Maybe VAT registrations are required in other EU countries?
If VAT is paid in other EU member states
- Claims for 2018 must be submitted before 29 March 2019
- How will this VAT be claimed after Brexit?
HMRC has updated its online guidance on the above, which can be viewed here.
Contact Constable VAT if any of the above will affect you or your business, we are happy to advise on any VAT related matter.
CONSTABLE VAT NEWS
Remember to enrol for Making Tax Digital on time and during the right enrolment window for your VAT accounting periods. Constable VAT have analysed the enrolment windows and our summary can be found here.
1. The Exemption for Goods Imported to be dispatched to Another EU Member State
This case concerned whether the exemption for import VAT on goods arriving in an EU member state to be dispatched immediately to another EU member state and whether domestic tax authorities can disapply the exemption where tax evasion is involved.
Vetsch is an Austrian company which acted as a tax representative for two Bulgarian companies, “K” and “B”. Vetsch submitted declarations stating that goods imported from Switzerland, by K and B, benefited from the exemption for goods imported for subsequent dispatch. However, the subsequent dispatch did not occur and Vetsch became liable under Austrian law, as representative, for the import VAT which should have been paid.
Vetsch appealed against a decision from the domestic tax authorities to that effect but the appeal was refused. Vetsch brought an appeal on a point of law before the domestic Courts which led to the CJEU referral.
The Court came to the conclusion that, as Vetsch was unaware and there was no evidence to support the idea that it knew or ought to have known about the subsequent evasion that the exemption could not be refused.
Constable Comment: This case shows how at an EU level, the strict interpretation of the law is not always adhered to if it creates inequitable results. In finding that Vetsch did not know and would not have known if carrying on business as a reasonable person would, the Court has upheld the idea of equity.
2. Retroactive Application of Implementing Decisions
This case concerned the application of the Decision authorising the Hungarian Government to apply the reverse charge procedure enshrined in EU law. The Hungarian tax authorities were notified of their authorisation in December 2015 but sought to rely on the implemented provision to retroactively assess Human Operator Zrt. for the January 2015 VAT return.
The question before the Court in this instance was whether EU law precludes national legislation from retroactively applying measures authorised in an Implementing Decision where that Decision does not make a comment on the retroactive applicability of that Decision or give a date on which it comes into effect.
The Court gave consideration to the principles of legal certainty and the protection of legitimate interests. They concluded that the requirement of legal certainty must be observed very strictly when it comes to rules liable to entail financial consequences, in order that those concerned may know precisely the extent of the obligations which the rules impose on them. It was also held that these principles must mean that EU law can only apply to situations after they have explicitly come into force.
In the absence of a provision in the Decision suggesting a different date for it to bite, the Court considered that it must be taken to be effective from the date on which it was published.
Constable Comment: This case is a good demonstration of how the CJEU seeks to protect the rights of individuals and businesses against the State. The fundamental principles of the EU and the spirit of the law are given a great degree of influence in the European Courts. This decision has prevented a seemingly unconscionable result.
First Tier Tribunal
3. Electric Blinds in a DIY Build
This case concerned the right to deduct input VAT incurred in relation to a DIY house build by Mr David Cosham. Mr Cosham designed an “eco-build” property and sought to recover input VAT on building materials used under the DIY housebuilders scheme. HMRC accepted certain elements of the claim but rejected the element which related to electric blinds installed at the property, asserting that electric blinds are not within the definition of “building materials” for VAT purposes associated with the scheme.
Appealing HMRC’s decision, Mr Cosham claimed that the blinds did fall within the definition as they are “ordinarily incorporated by builders in a building of that description”. He contended that “buildings of that description” should, in this case, be taken to mean “eco-builds”.
Giving some consideration to relevant case law, the Tribunal found that “eco-builds” were a well-established market sector and could be recognised as a distinct type of property. The onus was put on Mr Cosham to show that blinds such as those in question were “ordinarily incorporated” into properties of this description. Mr Cosham could produce no such evidence so his appeal was denied, the Tribunal holding HMRC’s decision to be correct.
Constable Comment: This conclusion drew on previous case law such as Taylor Wimpey and came to the conclusion that “eco-builds” are to be treated as a class of property in themselves. This is interesting as it could be argued that, compared to older housebuilding practices, the vast majority of new build homes are definable as “eco”. This case has opened up the question of what exactly is ordinarily incorporated into an “eco-build”. It is unsurprising that HMRC pursued this point. Blinds more generally are objected to by HMRC despite losing a previous case at the First Tier Tribunal on a related point.
4. Deception: A Supply of Goods or Services?
This case concerned Mr Owen Saunders who had been found guilty of taking money in exchange for work he promised to perform but never had the intention of performing. He had been found guilty as a criminal and been sentenced to time in prison as well as having been served a confiscation order for in excess of £60,000. The confiscated funds had been divided equally amongst his victims by way of compensation for their loss.
HMRC contended that Mr Saunders was engaged in a business activity and should have been registered for VAT. The Tribunal believed that the crucial issue was whether or not there had been a supply for a consideration made in the furtherance of business. Giving consideration to the examples of drug dealers (who can pass title in goods) and fences (who cannot as they never gained title) as well as the definition of a supply in accordance with VAT law, the Tribunal held that there was no supply by Mr Saunders for the monies he received.
The assessment and associated penalties against Mr Saunders were quashed, it was held that his conduct had led to a “total failure of consideration” which was evidenced by the fact that 100% of the confiscated money was paid back to the victims.
Constable Comment: This was an interesting case in that it analysed Mr Saunders as akin to a drug dealer or someone fencing stolen goods. A particularly interesting point raised was the fact that a drug dealer can pass title to his goods and thus his turnover represents supplies and consideration so, in turn, could create an obligation to register for VAT. This illustrates the point that a lack of compliance with the law does not discount the supplies made from turnover for VAT purposes.