Articles written by our expert VAT Consultants on the latest VAT issues.
The UK’s VAT rules are set down mainly within the VAT Act 1994, which is derived from the EU VAT Directive 2006/112/EC (“EVD”).
The EVD has direct and over-riding effect on all EU Member States but local legislation is required because the EVD allows for countries to pick and choose certain rules. As a result, the local VAT rules across the EU are not always consistent.
Why is this important when thinking about Brexit? It’s important because once the UK leaves the EU it will theoretically (but this is not certain) no longer be bound by the EVD. This means that the UK could have free reign to amend its VAT rules as it sees fit.
The UK government has published a position paper setting out its view on the Future Customs Arrangements it would like in place following Brexit.
This is one of several papers being issued which set out the Government’s desired outcome for Brexit across several areas.
This paper notes that in 2016, UK imports from and exports to the EU totalled £553bn via over 200,000 businesses. However, that total is likely to be bigger as it only considers VAT registered businesses.
The UK’s Upper Tribunal (UT) has rejected an appeal by HMRC which would have resulted in a case brought by Sportsdirect.com (SDC) being struck out.
SDC is an online retailer based in the UK making B2C sales of goods to consumers across the EU. Its business model involves SDC selling the goods but consumers then engaging with a third party (associated to SDC) which arranges for the delivery of the goods. Consequently, SDC does not treat its supplies as “delivered” goods. This is an arrangement that has been adopted by a number of online retailers and is sometimes referred to as the “delivery scheme”.
The European Court of Justice (ECJ) has ruled in the case C-592/15 British Film Institute (BFI) that the provisions related to exemption for cultural activities mentioned in the old Sixth VAT Directive and the new EU VAT Directive 206/112/EC are not directly applicable and tax payers should follow the legislation as it is transposed in each EU Member State.
BFI is a non-profit-making body established in order to promote and preserve cinema in the United Kingdom. BFI is partially financed via its activity of selling tickets for admission at theatres and film festivals located in the UK where it screens movies. From 1 January 1990 to 31 May 1996, it charged VAT at the standard UK rate for admission to movie screenings in various theatres and films festivals.
In the age of the digital economy there has been a large increase in online shopping in the UK in recent years.
Many of the goods sold to UK consumers are bought from overseas sellers using online marketplaces.
To cope with demand and ensure speedier deliveries, many of these overseas sellers are now storing their goods in UK warehouses, also known as fulfilment houses. Under existing VAT legislation, when the goods are in the UK at point of sale, this creates a liability for the overseas seller to register for and charge UK VAT on the sale. This is regardless of the level of sales, as a non-established seller doesn’t have entitlement to the VAT thresholds enjoyed by UK based sellers.
Back in July 2016, Uber taxi drivers had a case heard in the London Central Employment Tribunal which concerned whether in the UK Uber drivers should be:
- Seen as employees of Uber; or
- deemed to be self-employed and hence working independently
The decision was handed down in October 2016 with the decision being that the drivers are employees of Uber. This has important employment ramifications such as Uber drivers being entitled to worker’s rights including being paid the National Minimum Wage and receiving paid holiday.
However, a key point which has almost gone under the radar (but been brought into the spotlight recently by Jolyon Maughan) since the ruling was passed down is whether there are any other tax implications for Uber aside from those related to employment taxes. These could occur because the outcome of the ruling is that the way Uber’s business is structured has, fundamentally, become subject to change.
On the 9 February 2017, the CJEU ruled on the case C-21/16 Euro Tyre BV.
Euro Tyre is a Portuguese branch of a Dutch Company, Euro Tyre BV. The dispute concerned multiple intra-community supplies made by Euro Tyre between 2010 and 2012 to a group company, Euro Tyre Distribución de Neumáticos (Spanish established company). At the time of those supplies Euro Tyre Distribución de Neumáticos was only registered as a taxable person for the purposes of VAT in Spain, it was not yet registered on the system of taxation on intra-community acquisitions or registered in the VAT Information Exchange System (the ‘VIES system’). In March 2013 the Spanish tax authorities granted Euro Tyre Distribución de Neumáticos the status of intra-community operator with retrospective effect from 1 July 2012 (Euro Tyre expected to have achieved retrospective effect to 2010). Euro Tyre treated these supplies as being exempt with credit (the UK equivalent of zero rated).
The UK operates VAT grouping rules which results in 2 or more entities having the same VAT number as long as certain conditions are met.
A VAT group is considered to be a single taxable person and therefore one member of the group is designated as the “representative member” for the group.
Recently, the Upper Tribunal ruled on a question which the Lower Tribunal had answered differently in two separate cases (Standard Chartered/Lloyds UKFTT 316 and MG Rover Group/BMW/Rover Company UKFTT 327). The question concerned which member of the VAT group had the right to make claims for repayments of VAT (i.e. where VAT might not have been recovered at the right time and hence a claim was subsequently made for it). The Upper Tribunal heard the cases together because the Lower Tribunal had answered in Standard Chartered/Lloyds that the representative member had the right. However, in MG Rover Group/BMW/Rover it was held that the VAT group company which was involved in the transaction in question could make the claim.
Many UK architect firms are in demand throughout the EU, but many are not aware of how engaging in work overseas will have implications for their VAT obligations.
Rob Janering, Associate Director at Accordance, has written an article featured in Industry Today, about what VAT considerations must be taken into account when taking on a project in another country, as there may be a need for that architect firm to become VAT registered immediately.
Responsibilisation is becoming more common in the EU, and the issues of third party liability are now increasingly affecting the warehouse providers.
Rob Janering, Senior VAT Consultant at Accordance, has written for Logistics Business magazine about the issues currently facing the industry.