In this month’s VAT Update Gerry Myton and Mike Block bring the latest updates from HMRC – including brief guidance on the Plastic Packaging Tax, VAT repayments by bank transfer for NETPs and full customs controls from 01 January 2022.
Read on for more updates and a summary of recent VAT cases.
Plastic Packaging Tax
At the Budget 2021, the Government confirmed the introduction of a Plastic Packaging Tax from 1st April 2022. The tax aims to encourage greater use of recycled plastic and help tackle plastic waste.
The tax will apply to businesses that manufacture or import certain finished plastic packaging materials into the UK containing less than 30% recycled content.
The rate of tax will be £200 per tonne of plastic packaging.
Businesses are exempt from paying the tax if they manufacture or import less than 10 tonnes of plastic packaging in a 12 month period.
HMRC has recently released detailed guidance on PPT, although this cannot be done until 1 April 2022. To discuss further, please contact Mike Block
UK Border Controls – Effective from 1st January 2022
From 1 January 2022, full customs declarations and controls will apply to all goods moving between the EU and Great Britain. Imports from the EU will be subject to the same requirements as those that apply to goods imported from the rest of the world.
Traders will no longer be able to delay making import customs declarations under the Staged Customs Controls rules. Traders will have to make import customs declarations and pay relevant tariffs at the point of import.
Goods may be directed to an Inland Border Facility for documentary or physical checks
VAT-registered importers can continue to use Postponed VAT Accounting (PVA) on all customs declarations that require them to account for import VAT.
Traders should also note that further changes will be introduced from July 2022 in areas including requirements for full safety and security declarations for all imports and new requirements for Export Health Certificates and for Phytosanitary Certificates. To discuss further, please contact Gerry Myton.
HMRC introduce VAT repayments by bank transfer for NETPs
HMRC are now making available the option for non-established VAT registered persons (NETPs) to request VAT repayments by bank transfer.
Businesses that are registered for UK VAT but do not have a business address in the UK and are due a VAT repayment, automatically receive a payable order from HMRC in respect of their refund. Following Brexit and the COVID-19 pandemic many banks and countries no longer accept payable orders.
NETP can provide their bank account details by completing a form accessed via their government gateway account and the NETP will receive future repayments directly into their bank account. To discuss further, please contact Oliver Noaks.
Mandarin Consulting Limited v HMRC [2021] UKUT 292 (TCC)
Mandarin Consulting Ltd provided career coaching to students of Chinese origin. Those services would be outside the scope of VAT if supplied to persons whose usual residence was outside the EU. In order to treat its supplies as UK VAT free the Mandarin needed to demonstrate where the recipients of its services lived.
The Upper Tribunal (UT) considered the evidence of the students’ usual place of residence presented by Mandarin and found that, whilst the FTT had failed to consider the evidence presented by Mandarin, the taxpayer had still failed to demonstrate that all of its students pre-July 2016 resided outside the UK.
Mandarin Consulting Ltd held insufficient evidence to show that its customers belonged outside the EU, so its supplies were taxed in the UK at the standard rate
Since the UK left the EU, the rules have changed to treat supplies to individuals belonging outside the UK as VAT free. This case has potential implications for the education sector. To discuss further, please contact Gerry Myton.
Mainpay Ltd v HMRC [2021] UKUT 270 (TCC)
Mainpay, an umbrella company, provided the services of temporary medical consultants and specialist general practitioners to an employment business that provided them to NHS Trusts and other hospitals.
The First Tier Tribunal (FTT) and the Upper Tier Tribunal (UTT) disagreed and rejected the argument that Mainpay was carrying out “clinical decision-making” which could be said to be medical care. Mainpay itself was not registered with any medical body, nor did it have any specific medical expertise.
The UTT has concluded that the services of an umbrella company Mainpay Ltd who provide medical practitioners do not qualify for VAT exemption. The basis for this decision is that an umbrella company is not providing medical care and is instead supplying staff and therefore the supply is subject to VAT at the standard-rate. To discuss further, please contact Gerry Myton.
Greenspace Limited v HMRC [2021] UKUT 290 (TCC)
Greenspace Limited supplies insulated roofing panels which it treated as the supply of energy saving materials and therefore applied VAT at the reduced rate. HMRC considered the supplies did not fall within the reduced rate and are standard rated. HMRC assessed the taxpayer for £2.5 million.
HMRC argued that the insulation has a specific function that is separate and distinct from materials which can also serve another purpose. Old panels were removed and new insulated panels were slotted into the existing framework of their customer’s roof.
In HMRC’s view, a conservatory which had only struts and glazing bars could not be described as having a roof.
In 2020 the First-tier Tribunal (FTT) decided that the panels were not “insulation for a roof” but were a new roof in their own right, and that the appellant’s supplies did not therefore qualify for the reduced rate of VAT
Following its unsuccessful appeal to the First Tier Tribunal (FTT) the Company had made an appeal to the Upper Tribunal (UT).
The UT has now supported HMRC’s position, stating that the panels were not just insulation, but they formed a whole new roof for the conservatory, which is not eligible for the reduced rate. To discuss further, please contact Mike Block.
Gray & Farrar International LLP v HMRC, [2021] UKUT 293
Gray & Farrar provided a matchmaking facility to high net worth individuals. Gray and Farrar believed its services fell within the definition of consultancy and had not charged VAT to non-taxable persons residing outside the EU. HMRC disagreed and considered these services were all standard rated.
The FTT decided that the services were not consultancy, and remained standard rated.
The Upper Tribunal (UT) has identified an error in law in the FTT decision and remade it in the taxpayer’s favour. The UT concluded that services was provided as part of the matchmaking, combined with the information relating to a potential match, and was properly characterised as consultancy, and outside the scope of UK VAT when provided to non EU individuals.
Since the UK left the EU, the rules have changed to treat supplies to individuals belonging outside the UK as VAT free. To discuss further, please contact Mike Block.
From the VAT Team at H W Fisher, can we wish all a peaceful and restful festive period and our best wishes for a healthy and prosperous 2022.
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