VAT update November 2018

In this month’s update we report on new regulations adopted by ECOFIN which are intended to combat VAT fraud, infringement proceedings brought against Italy and the UK following publication of the so-called “Paradise Papers” and publication of the response to HMRC’s consultation on the “split payment” method of VAT collection. We also comment on three recent decisions relating to the scope of the FTT’s jurisdiction in relation to public law issues, input tax recovery by a student union shop and application
of the reverse charge rules to investment management services received from outside the EU.

News items

The EU Commission has issued a press release announcing the adoption by the Economic and Financial Affairs Council of the European Union (ECOFIN) of regulations intended to increase administrative cooperation between member states in order to combat VAT fraud. Read more.

Commission follows up on “illegal” tax breaks for yachts and aircraft

The EU Commission has issued infringement proceedings against the UK (specifically in relation to the Isle of Man) and Italy in relation to the granting of what it terms illegal VAT relief on the purchase of private jets and yachts. Read more.

Response to consultation on the “split payment” method of VAT collection

HMRC has proposed the introduction of a split payment method for collecting VAT. Instead of a supplier accounting for VAT in the normal way, another party in the transaction chain would account for VAT directly to HMRC and accordingly it would pay only the net sum to the supplier. Read more.

Cases

In Hofmanns Henley Limited v HMRC, the First-tier Tribunal (FTT) has held that it does not have jurisdiction to consider public law arguments in the context of a VAT appeal. Read more.

In Loughborough Students’ Union v HMRC, the Upper Tribunal (UT) has upheld the FTT’s decision to dismiss Loughborough Students’ Union’s (LSU) appeal against HMRC’s decision to deny its claim for repayment of output tax in respect of sales of stationery, art materials and other items from the shops which LSU operates on campus. Read more.

In The Wellcome Trust Limited v HMRC, the FTT has held that the UK VAT reverse charge rules are not applicable to supplies received from overseas for non-economic purposes. Read more.