Constable VAT Focus 6 July 2023


Get your postponed import VAT statement
If you account for your import VAT on your VAT Return using Postponed VAT Accounting, you will need access to the Customs Declaration Service to obtain a postponed import VAT statement online. Information about how long it takes to get access to the Customs Declaration Service has been updated.

Register to report and pay VAT on distance sales of goods from Northern Ireland to the EU
The above guidance details how to register for the One Stop Shop (OSS) Union Scheme to report and pay VAT due on distance sales of goods from Northern Ireland to consumers in the EU. The guidance has been updated to confirm that you can now view and amend your One Stop Shop (OSS) Union Scheme registration details through your HMRC business tax account.


High Court

1. Legitimate expectation

This case concerned Realreed Limited (RL), a company which made supplies of serviced accommodation in over 200 flats which were treated as VAT exempt. In 2019, HMRC took the view that RL was making taxable supplies of accommodation and raised assessments for unpaid VAT in the sum of £4.8million. This decision regarding the VAT treatment of the supply is under appeal to the FTT and the case is yet to be heard, however RL also proceeded to the High Court to request judicial review and it is the outcome of that request which is considered in this appeal. Three grounds were advanced in arguing for judicial review. These were that HMRC’s decision to raise the disputed assessments:

  1. was unreasonable, conspicuously unfair and/or vitiated by the unlawful frustration of a legitimate expectation held by the Claimant;
  2. was contrary to general principles of EU law; and/or
  3. disproportionately infringed the Claimant’s rights under Article 1 of the Protocol 1 to the European Convention on Human Rights.

It was the first of these grounds, ‘legitimate expectation’, that was considered in most detail. RL argued that HMRC carried out VAT inspections on multiple previous occasions and was aware that RL was treating the supplies of serviced accommodation as VAT exempt and this was never challenged. In addition, HMRC had previously raised assessments which were based on amending partial exemption calculations, leading RL to assume that HMRC was content with the VAT treatment of the supplies. HMRC contended that RL had no legitimate expectation that the supplies could be treated as VAT exempt.

The High Court highlighted that the HMRC officers, during the VAT inspection, did not specifically examine whether the VAT exemption applied and also took the view that even if HMRC had ruled that the supplies were subject to VAT, RL would have challenged this ruling (as its currently doing so to the FTT). As a result, the Court concluded that RL made its own decision regarding the liability of its supplies and did not do anything in reliance on the alleged legitimate expectation. Alternatively, RL did not prove that anything which it claims that it might have done in reliance on the alleged legitimate expectation resulted in a detriment to RL. The application for judicial review was dismissed.

Constable Comment: This hearing did not consider the VAT liability of the supply in question or whether HMRC’s assessments were correct, this will be determined by the FTT. However, RL argued, as a result of HMRC’s inspections, it had a legitimate expectation to assume its supplies are correctly treated as VAT exempt. However, the Court ruled that the officers did not specifically consider whether the supplies were VAT exempt or not and that the RL made its own decision on this point. If a taxpayer wishes certainty over the VAT treatment of certain supplies, we suggest submitting a Non-Statutory Clearance (NSC) to HMRC in which all the relevant facts are set out. RL’s situation highlights the point that businesses cannot assume that the fact that HMRC does not pick up a liability issue during a VAT inspection means the VAT treatment is correct and is not protection against future assessments. Constable VAT has relevant experience and would be pleased to assist with any NSC.


2. Health and Welfare VAT Exemption

This case concerned Illuminate Skin Clinics Ltd (ISC),  a business running a private clinic offering a range of aesthetic, skincare and wellness treatments. HMRC refused a VAT repayment claim in relation to ISC’s VAT return for the period 12/16 and raised best judgment assessments for underpaid output tax on the grounds that ISC’s supplies should have been standard rated for VAT purposes and had been treated as VAT exempt.

The treatments offered by ISC included Botox, dermal fillers, CoolSculpting, prescription skincare, chemical peels, thread lifting, aqualyx and more. The appellant’s accountant advised in a letter that these supplies should be treated as VAT exempt.

The supply of services consisting in the provision of medical care by a person registered or enrolled in the register of medical practitioners is VAT exempt in the UK. It was agreed between HMRC and ISC that the sole director and shareholder of ISC complies with the VAT exemption rules in relation to their qualification as a medical practitioner, therefore the only dispute was whether the supplies were of ‘medical care’.

The FTT relied on case law and confirmed that medical care includes the ‘diagnosis, treating and, in so far as possible, curing diseases or health disorders’, therefore it had no hesitation in deciding that the services which ISC offers are not VAT exempt within the proper meaning and effect of the legislation. The FTT highlighted that ISC customers use its services because they want to, not because they are encouraged to do so by a medical practitioner as a result of a disease or health disorder.

Constable Comment: This case considered whether certain aesthetic treatments could qualify for VAT exemption. This is a complex area of VAT law and we would recommend seeking professional advice if there is any ambiguity. Constable VAT would be pleased to assist with any queries.


Since the end of the transitional period on 31 December 2020 European Court judgements are not binding on the UK in most cases. However, it is expected that UK courts will still take these judgements into consideration and there may be occasions where they have a more binding effect.

3. What constitutes a fixed establishment?

This case concerned Cabot Plastic Belgium SA (Cabot P)’s supply to an associated company Cabot Switzerland GmbH (Cabot S), a company which has its place of business in Switzerland but is identified for VAT purposes in Belgium for selling carbon-based products. Cabot S entered into a tolling contract in 2012 (the agreement) with the Belgian company Cabot P.

Under the agreement, Cabot P stored raw materials (owned by Cabot S) which it then manufactured, using its own equipment, into articles used in making plastic and stored the finished goods until Cabot S sold them. Cabot P also provided additional services to Cabot S including managing products stored in third-party warehouses, making recommendations to optimise manufacturing process, carrying out internal and external technical checks and assessments and facilitating customs formalities.

Following a tax inspection in 2017, the Belgian tax authority took the view that Cabot S had a fixed establishment in Belgium for VAT purposes within the premises of Cabot P. It arrived at this conclusion because Cabot P put its production plant, distribution centre and warehouses at disposal of Cabot S. In addition, Cabot P made its operational staff available to Cabot S. As a consequence of concluding that Cabot S had a fixed establishment in Belgium, the Belgian tax authority concluded Belgian VAT should have been charged by Cabot P in the sum of €10,609,844 in the relevant period.

Cabot P argued that the place of supply of the services to Cabot S was in fact Switzerland, where Cabot S has established its place of business. If this were the case, no Belgian VAT would be due.

The CJEU highlighted that the fact that Cabot P owns the human and technical resources concerned does not preclude the possibility of Cabot S having a fixed establishment in Belgium provided it has immediate and permanent access to those resources as if it was its own. However, the CJEU concluded that since Cabot P remains responsible for its own resources and provides the services at its own risk, the resources of Cabot P do not become resources of Cabot S in this case, even if the agreement is exclusive and Cabot S is the only customer of Cabot P.

As a result, the CJEU concluded that Cabot S does not have a fixed establishment in Belgium and therefore the place of supply was correctly identified by Cabot P as Switzerland, meaning no Belgian VAT is due.

Constable Comment: In this case the CJEU considered whether a company had sufficient degree of permanence and a suitable structure in terms of human and technical resources to give rise to a ‘fixed establishment’ for VAT purposes. The CJEU provided some useful analysis in reaching its conclusion and this case will be of interest to anyone involved with cross border supplies.

Please note that this newsletter is intended to provide a general overview of the subject. 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 blog post. Specialist VAT advice should always be sought in relation to your particular circumstance.