VAT update - February 2018

In this month’s update we report on the EU Commission’s proposals to reduce VAT compliance costs for small businesses, guidance published by HMRC following the Supreme Court’s decision in InvestmentTrust Companies and the latest consultation to implement “making tax digital” for VAT.

We also comment on three recent cases involving the impact of discounts on consideration for VAT purposes; when a lack of funds is a reasonable excuse for VAT default; and when different elements of a supply can be taxed at different rates.

News

EU Commission proposes flexibility over VAT rates for small businesses
On 18 January 2018, the European Commission proposed new rules which would allow Member States greater flexibility in setting VAT rates and reduce red tape for small businesses.

Business Brief 4 (2017) – HMRC confirms its position following the Supreme Court judgment in Investment Trust Companies
In our April 2017 VAT Update (which can be viewed here) we reported on the Supreme Court’s judgment in Investment Trust Companies (in liquidation) v HMRC [2017] UKSC 29. The case concerned claims made by final consumers against HMRC for VAT that had been wrongly charged to them by their suppliers.

Making tax digital
On 18 December 2017, HMRC published for consultation draft secondary and tertiary legislation to implement "making tax digital" for VAT.

Cases

Finanzamt Bingen-Alzey – Discounts and consideration for VAT
In Finanzamt Bingen-Alzey v Boehringer Ingelheim Pharma GmbH & Co. KG C-462/16, the Court of Justice of the European Union (CJEU) has confirmed that consideration for VAT purposes should be reduced by any discount applied, regardless of who benefited from the discount.

Design Rationale – Lack of funds a reasonable excuse for VAT default
In Design Rationale Ltd v HMRC [2017] UKFTT 878 (TC), the First-tier Tribunal (FTT) has held that a lack of funds caused by HMRC owing significant amounts to the taxpayer was a reasonable excuse for the taxpayer failing to account for VAT on time.

Stadion Amsterdam CV – when can different elements of a supply be taxed at different rates?
In Stadion Amsterdam CV v Staatssecretaris van Financiën C-463/16, the CJEU has confirmed that, in the absence of specific statutory language to the contrary, a single supply, which includes two individually priced elements, is taxable at the rate of the principle supply.