VAT update July 2018

In this month’s update we report on the alignment of the period for recovery of VAT by exempt public sector entities; new guidance concerning VAT liability on goods supplied on approval; and HMRC’s policy paper on a new regime for interest and penalties.

We also comment on three recent VAT cases on whether VAT is payable on a transfer by a company to a shareholder on a buy-back of shares; input tax recovery on supplies wrongly treated as exempt; and whether certain claims for the return of overpaid VAT are to be treated as having been made by the “single taxable person” constituted by the representative member of the VAT Group.

News

Alignment of period for recovery of VAT by exempt public sector entities

On 25 June 2018, HMRC published “Revenue and Customs Brief 4 (2018): aligning time limits for VAT refund schemes”.

Guidance on VAT liability on goods supplied on approval

On 18 June 2018, HMRC published “Revenue and Customs Brief 5 (2018): VAT liability on goods supplied on approval”. The Brief explains HMRC’s policy in circumstances where goods are supplied on approval and the liability in relation to delivery changes.

Policy paper on interest and penalties

On 6 July 2018, HMRC published Policy paper: “Interest harmonisation and sanctions for late payment”. The Paper outlines ways in which HMRC would like to modify the interest payment and penalty regimes applicable to the late payment, or repayment, of VAT.

Cases

Skarbowej: CJEU confirms that VAT is payable on the transfer of immovable property by a company to a shareholder on a buy-back of its shares

In SZEF Krajowej Administracji Skarbowej v Polfarmex Spółka Akcyjna w Kutnie (Case C‑421/17), the Court of Justice of the European Union (CJEU) has confirmed that the transfer by a company to one of its shareholders, on a buy-back of the company’s shares, of ownership of immovable property, is a supply of goods for consideration subject to VAT provided the property is used in an economic activity by that company.

Zipvit: No input tax recovery for supplies wrongly treated as VAT exempt

In Zipvit Limited v HMRC [2018] EWCA Civ 1515, the Court of Appeal, agreeing with the Firsttier Tribunal (FTT) and the Upper Tribunal (UT), has held that the taxpayer was not entitled
to reclaim VAT in respect of supplies of services which had been wrongly treated as exempt from VAT.

Taylor Clark: Claims for the return of overpaid VAT not to be treated as having been made by or on behalf of the “single taxable person”

 In HMRC v Taylor Clark Leisure Plc [2018] UKSC 35, the Supreme Court has held that a company which claimed recovery of VAT is not to be considered to have made a claim for repayment, where another company, which had formerly been a member of its VAT Group, had made the relevant claims. The other company had claimed repayment in its own right and not on behalf of the first company.