V@ update - March 2024
Welcome to the March 2024 edition of RPC's V@, a monthly update which provides insightful analysis and news from the VAT world relevant to your business.
News
- The Chancellor announced in the Budget that the VAT registration threshold is to increase (from £85,000 to £90,000) with effect from 1 April 2024 – the first rise for some seven years.
- The previously-announced consultation on the impact of the decision in Uber Britannia Ltd v Sefton MBC [2023] EWHC 1975, on the correct VAT treatment of private hire bookings is to proceed (see paragraph 5.45 of the Budget).
- The Government is to bring trades in carbon credits within the scope of the VAT Terminal Markets Order (which provides for zero-rating of commodity transactions on named commodity exchanges) (see paragraph 1.17 of the Overview of Tax Legislation and Rates).
Case reports
Whether person taxable – NHS trust not required to charge VAT on car parking
The Court of Appeal (CA) has held that an NHS trust (the Trust) that provided car parking services was not required to charge VAT on those car parking services.
Background
The Trust's principal purpose was to provide goods and services for the purposes of the health service in England. It was a public authority for the purposes of section 41A, Value Added Tax Act 1994 (VATA). The Trust was also permitted under its constitution to carry on activities for the purpose of generating additional income in order to better carry on its principal purpose.
Section 41A, VATA, applies to supplies made: "in the course of activities or transactions in which … [a public authority] is engaged as a public authority". It sets out a list of supplies by public authorities that are automatically subject to VAT (none of which was in issue in this case), and also provides that if a supply made by a public authority: "is not in respect of … an activity [set out in the list], it is to be treated for the purposes of this Act as a supply in the course or furtherance of a business if (and only if) not charging VAT on the supply would lead to a significant distortion of competition".
The First-tier Tribunal (FTT) had previously dismissed the Trust's appeal against HMRC's refusal of its claim for repayment of VAT on the grounds:
- that it should be regarded as a taxable person pursuant to section 41A ,VATA (and Article 13(1) Principal VAT Directive (PVD)), in relation to the supply of parking services;
- that if it was a taxable person, then its supply of car parking was not closely related to the supply of hospital and medical care and therefore exempt under Article 132(1)(b), PVD and Item 4, Group 7, Schedule 9, VATA; and
- that its supply of car parking services constituted an economic activity and therefore was not outside the scope of VAT.
The Trust appealed only in relation to the first ground to the Upper Tribunal (UT), which agreed with the FTT and dismissed its appeal. The Trust appealed to the CA.
CA judgment
The appeal was allowed.
The CA considered that guidelines issued by the Department of Health in 2015, which stated that hospital users should be able to get to hospital (and if necessary park) "as safely, conveniently and economically as possible", and that charges should be reasonable and concessions available to a broad variety of people including frequent outpatients and visitors with gravely ill relatives, meant that the Trust was operating under a "special legal regime".
Accordingly, the CA considered that the Trust should be treated as carrying out a supply in the course or furtherance of a business if, and only if, not charging VAT on the supply would lead to "a significant distortion of competition" (as section 41A(3), VATA, provided at the relevant time). It was for HMRC to establish (on a balance of probabilities) that there would be a significant distortion of competition if the Trust did not charge VAT on its parking supplies. The CA considered that it had not done so and, allowing the Trust's appeal, re-made the FTT's decision so as to allow the Trust's claim for repayment of VAT.
Why it matters:
This case provides useful clarity on the VAT status of supplies made by public authorities, which is likely to be of increasing importance in light of the straitened circumstances in which many such bodies find themselves.
The judgment can be viewed here.
Import VAT – For the purpose of transfer of residence relief the relevant date is the date of importation and not the date of arrival of the individual to the UK
Background
Antri Georgiou (G) appealed HMRC's decision to deny her transfer of residence relief (ToR) against customs duty and VAT for importing her car from Cyprus to the UK. G, a Cypriot citizen, ordered the car in July 2021, paid a deposit, and received it in September 2022. She used the car personally in Cyprus until moving to the UK in February 2023. Whilst G resided in the UK, her car remained in Cyprus and was occasionally used by her when visiting Cyprus. Her brother occasionally used the car for maintenance purposes. HMRC rejected G's ToR application, citing insufficient possession of the car (less than six months) before her move to the UK. G appealed to the FTT.
FTT decision
The appeal was allowed.
The FTT concluded that the Customs and Excise Duties (Personal Reliefs for Goods Permanently Imported) Order 1992 (the 1992 Order) and the Customs (Reliefs from a Liability to Import Duty and Miscellaneous Amendments) (EU Exit) Regulations 2020 (the 2020 Regulations) both offered relief from customs duty and import VAT under specific, overlapping but not identical, conditions. The FTT decided that the statutory language did not suggest that if relief was not accessible under the 2020 Regulations, it should also be denied under the 1992 Order.
G had communicated with HMRC before importing her car, and at the date of the FTT hearing, she had possessed and used the vehicle in Cyprus for over six months. The ToR relief required a declaration for relief to be made up to six months before, or twelve months after, a change in normal residence but the validity of the application was linked to the importation date. The FTT concluded that the relief conditions under the 1992 Order were satisfied, because the requirement for at least six months of possession related to the period before importation, not transfer of residence.
Why it matters:
This decision demonstrates the complexity of the ToR regime. Fortunately for the taxpayer concerned (who represented herself), the FTT rejected HMRC's arguments.
The decision can be viewed here.
Exemption – Fruit, nut and oat bars are 'confectionery' and therefore standard-rated
In the latest instalment in this long-running litigation (as previously discussed here), the FTT, in a decision remitted to it by the UT, has concluded that the fruit, nut and oat bars (the Bars) that were the subject of the appeal constituted 'confectionery' falling within Item 2, Group 1, Schedule 8, VATA. They were not therefore eligible to be zero-rated for VAT purposes under Item 1, Group 1, Schedule 8, VATA, as "food of a kind used for human consumption".
Background
The UT had previously held that the FTT had erred in failing to consider: (1) the healthiness of the Bars and their marketing as healthy; and (2) the fact that the Bars did not contain ingredients associated with traditional confectionery, such as cane sugar, butter or flour.
FTT decision
The appeal was dismissed.
The FTT discussed the meaning of the term 'confectionery', and considered that it was a broad term that extended beyond traditional sweets and chocolates to encompass cakes and biscuits. It was possible that not all processed sweet snack foods were confectionery, but the FTT considered that all confectionery came within the term 'sweet snack'. It considered that the most important factor in assessing whether an item was confectionery' was how it looked, felt and tasted (as opposed to its ingredients, how it was made, and when, where and how it was consumed, all of which were also relevant). Factors that were of less weight, albeit that they still need to be considered, were the healthiness of the item, how it was packed, marketed and sold, and who consumed the item and how they saw the product.
Considering all of these factors, the FTT considered that on balance the Bars constituted confectionery and dismissed the appeal.
Why it matters:
While confectionery is of considerable general interest in the VAT world, the long-running nature of this litigation shows how important it is for fact-finding tribunals to take the right factors into consideration when determining appeals.
The decision can be viewed here.