VAT update - April 2020

In this month’s update we report on (1) the Value Added Tax (Finance) Order 2020 (SI 2020/209), which amends the fund management exemption; (2) HMRC’s guidance on the deferral of VAT payments due to COVID-19; and (3) HMRC’s guidance on how importers can pay no import duty and VAT on medical supplies, equipment and protective garments.

We also comment on three recent cases which consider (1) the deduction of input VAT on supplies of postal services mistakenly treated as VAT exempt; (2) penalties imposed for deliberate inaccuracies in VAT returns; and (3) whether the principle of fiscal neutrality is breached by treating state-regulated service providers differently from non-state-regulated providers.

News items

Treasury makes Value Added Tax (Finance) Order 2020 (SI 2020/209) amending the fund management exemption

On 3 March 2020, the Treasury made the Value Added Tax (Finance) Order 2020 (SI 2020/209) to (i) bring “qualifying pension funds” within the fund management exemption, and (ii) remove the requirement that closed-ended collective investment undertakings must invest wholly or mainly in securities. Read more

HMRC publishes guidance on deferral of VAT payments due to COVID-19

On 26 March 2020, HMRC published guidance (updated on 3 April 2020) in relation to temporary changes to the VAT payments due between 20 March 2020 and 30 June 2020 (the deferral period) to help businesses manage their cash flow during the current COVID-19 crisis. Read more

HMRC publishes guidance on how importers can pay no import duty and VAT on medical supplies, equipment and protective garments

On 31 March 2020, HMRC published guidance on how importers can pay no import duty and VAT on protective equipment, relevant medical devices or equipment brought into the UK from non-EU countries during the COVID-19 crisis. Read more

Cases

Zipvit – Supreme Court considers deduction of input VAT on supplies mistakenly treated as VAT exempt

In Zipvit Ltd v HMRC [2020] UKSC 15, the Supreme Court has referred a number of questions to the Court of Justice of the European Union (CJEU) regarding the correct interpretation of Article 168 of the Principal VAT Directive, in connection with the question of whether a recipient of postal services may deduct input VAT in relation to those supplies where both parties and HMRC had mistakenly treated the supplies as exempt from VAT. Read more

Booth – Penalty appeal struck out

In CF Booth Ltd v HMRC [2020] UKFTT 35 (TC), the FTT struck out the taxpayer’s appeal against penalties imposed for deliberate inaccuracies in its VAT returns, on the basis that the appeal amounted to an “abuse of process”. Read more

LIFE Services – fiscal neutrality not breached by differences in regulation status

In LIFE Services v HMRC and TLC v HMRC [2020] EWCA Civ 452, the Court of Appeal held that the principle of fiscal neutrality is not breached by treating state-regulated service providers differently from non-state regulated providers for the purposes of the exemption from VAT of the supply of welfare services, regardless of whether the regulation regime is consistent across the UK. Read more

We hope you are all staying safe and have settled into your new way of working. Next month will see a change to the way we update you on developments in the world of VAT. We will be launching a new publication, V@, which will be a one stop shop for developments in VAT that may impact your business. We hope you enjoy reading our new publication and we would welcome any feedback on the content or new format that could improve it.