VAT Update - February 2019

In this month’s update we report on (1) changes to the VAT IT system rules and processes if the UK leaves the EU without a deal; (2) EU exit legislation; and (3) revisions to HMRC’s Notice of Making Tax Digital for VAT.

We also comment on three recent cases relating to (1) non-compliance with time limits to respond to information requests in VAT refund claims; (2) whether failure to check the accuracy of information in a VAT return is a “careless” or “deliberate” inaccuracy; and (3) the correct VAT treatment for fees paid in connection with a loyalty scheme.

News items

Changes to VAT IT system rules and processes if the UK leaves the EU without a deal

 On 4 February 2019, HMRC published guidance on the changes to the way VAT is paid or reclaimed if the UK leaves the EU without a deal. Read more.

EU exit legislation

As the date the UK is set to leave the EU looms, the government is publishing legislation to make consequential and transitional amendments to VAT legislation, to cope with the changes that will be needed when the UK leaves the EU. Read more.

Making Tax Digital for VAT

On 18 January 2019, HMRC updated VAT Notice 700/22 on Making Tax Digital for VAT (MTDfV). HMRC have extended its MTDfV software pilot to include VAT groups, trusts, unincorporated charities and VAT divisions and all businesses that are required to file their VAT returns under MTDfV with effect from 1 April 2019. Read more.

Cases

Sea Chefs Cruise – effect of non-compliance with information request in Directive claims

In Sea Chefs Cruise Services GmbH v Ministre de l’Action et des Comptes publics (C-133/18), Advocate General Hogan has opined that the fact a trader failed to comply with an information request within the time limit provided by Directive 2008/9/EC (the Directive) is not fatal to its claim for a refund. Read more.

Sacutia Healthcare Ltd – careless or deliberate inaccuracy
In Sacutia Healthcare Ltd v HMRC [2018] UKFTT 699, the First-tier Tribunal (FTT) held that inaccuracies in a return were deliberate due to the taxpayer’s total lack of care and failure to check the accuracy of the information the taxpayer provided to its accountants for the purpose of preparing its VAT returns. Read more.

Tesco – is loyalty deductible?
In HMRC v Tesco Freetime Ltd and another [2019] UKUT 18 (TCC), the Upper Tribunal (UT), in dismissing HMRC’s appeal, held that VAT incurred on fees paid by a subsidiary of the Tesco Group to third party suppliers, as part of a loyalty scheme, was deductible for VAT purposes. Read more.