VALUE ADDED NEWS: VAT & INDIRECT TAX UPDATES – December 2021

Your one-page December 2021 Indirect tax summary to enjoy with a mulled wine and a mince pie.

Cases:

• Have you sold shares in a UK subsidiary in order to raise funds for another taxable activity? If so, please talk to us. In Hotel LA Tour Ltd, it was found that VAT incurred by a company on costs relating to a UK share sale of a subsidiary could be recoverable as the aim was to raise funds for the development of a new hotel and therefore related to a taxable activities.
• In Mandarin Consulting Limited, the taxpayer provided career coaching and support services to students not in the UK. It was decided the services provided were consultancy services rather than a supply of education. This meant that the services were taxed where the customer belongs (outside of the UK) and not where the services were performed (in the UK and therefore subject to VAT). However, as the taxpayer couldn’t provide evidence that its customers did have their usual place of residence outside the UK, VAT was found to be due on their supplies. A learning point from this case is to keep good records of where the customer resides to support the VAT treatment applied.
• On a similar theme, the Upper Tribunal reversed the 2019 First Tier Tribunal decision and decided matchmaking services provided to non-EU residents were “consulting” (the predominant service was advice) and was therefore outside the scope of UK VAT as the place of supply was where the customer resided. For supplies since Brexit this decision would also affect supplies to EU residents. See Gray & Farrar International LLP.
• Proof that goods have left the UK is incredibly important as this case shows. In CPR Commercials Limited, The Tribunal held that CPR was not entitled to zero-rate its supplies as it had failed to provide sufficient evidence of the dispatch of goods from the UK. It was held they should have charged VAT at 20% on these supplies and are subject to penalties on these amounts.

HMRC Updates:

• This Policy Paper explains HMRC’s policy on customs controls for those exporting from 1 January 2022. From this date, exports between GB and EU are subject to FULL customs controls.
• HMRC explains here how to use the simplified declaration procedure when exporting goods from the UK. From 1 January 2022, the locations where you will need to submit an arrived export declaration, or a pre-lodged export declaration, have changed. A departure message will be a legal requirement for all exports.
• Other guidance has also been updated on simplified declaration procedures when importing into the UK. From 1 January 2022 changes have been made to locations where you need to make a simplified frontier declaration before your goods board.
• The ability to delay customs declarations is changing from 1 January 2022. Read HMRC’s guidance here.
• This Guidance has been updated to give clarification regarding when importers and exporters need supplier’s declarations. It explains how to prove the originating status of your goods and check if you can claim preferential tariff treatment.
• Lots of Plastic Packaging Tax guidance has been released, including information on registration, more examples of packaging subject to the tax and information about packaging made up of several components.
• This Notice explains how to account for VAT on goods and services provided by registered health professionals, which has been updated with information about umbrella companies.
• You can now use the Trader Support Service to claim for goods brought into NI from countries outside the UK and EU.
• Guidance on how to correct a previous One Stop Shop return has been updated.