HMRC have published a recent agent update. In respect of VAT it covers:
What is a Certificate of Origin (CO)?
A CO is a formal, official document which evidences in which country a good or commodity was manufactured. The certificate of origin contains information regarding the product, its destination, and the country of export.
A CO is required for most treaty agreements for cross-border trade and have become more important since Brexit (no more single market alas).
Why is a CO important?
The CO is an important document because it determines whether certain goods are eligible for import, or whether goods are subject to duties.
CO – General
Customs officials expect the CO to be a separate document from other commercial documents such as invoices or packing lists. Officials may also expect it to be signed by the exporter, the signature notarised, and the document subsequently signed and stamped by a Chamber of Commerce. Additionally, the destination Customs authority may request proof of review from a specific Chamber of Commerce.
Some countries accept electronically issued COs which have been electronically signed by a Chamber of Commerce.
Types of CO
A CO can be either in paper or digital format and must be approved by the requisite Customs Authority.
There is no standard CO document for global trade, but a CO prepared by the exporter, has at least the basic details about the product being shipped.
Non-preferential COs, also known as “ordinary COs” indicate that the goods do not qualify for reduced tariffs or tariff-free treatment under trade arrangements between countries. If an exporting country does not have in place a treaty or trade agreement with the importing country, an ordinary CO will be needed.
This is for shipments between countries with a trade agreement or reduced tariffs and proves the goods qualify for reduced import duties.
Some countries require additional information to demonstrate the authenticity of the information in the CO. A Legalised CO is an ordinary CO that has been further authenticated. The legalisation process usually involves the CO being validated by various appropriate authorities to give more evidence to its authenticity.
A Certified CO is similar to a n ordinary CO. However, it has been certified by a Chamber of Commerce, government agency or other relevant authority to confirm its authenticity.
Certification involves an in-depth review of all of the information declared on the CO, as well as a thorough side-by-side comparison with the requirements of the trade agreement and regulations of the country of import to ensure full compliance.
A EUR1 certificate is used in trade between the UK and partner countries. It is used to confirm that goods originate in the EU or a partner country so that the importer can benefit from a reduced rate of import duty.
EUR1 certificates are issued by Chambers of Commerce or Customs offices.
Contents of a CO
A CO will typically contain the following information:
* A waybill is a document issued by a carrier giving details and instructions relating to the shipment of a consignment of cargo. It shows the names of the consignor and consignee, the point of origin of the consignment, its destination, and route.
A business will need to check with its local Chamber of Commerce.
has been updated. The Notice sets out how and when a business can apply zero-rate exported goods.
Information on the types of fuel that the Extra Statutory Concession 9.2 does not apply to, and when you cannot zero rate the export of a motor vehicle has been updated.
And: Information on evidence relating to zero rating and direct exports – paragraphs 6.1, 6.5, 7.3 and 7.4.
Information provided by the Office for National Statistics has revealed that the number of UK businesses registering for VAT and PAYE dropped by over 40,000. This is probably a result of a number of issues (I presume):
This is the first drop in registrations since 2011 with the current number being 2.7 million. The most likely business to deregister are sole proprietors and other small businesses. The most negatively affected trade sectors were transport and storage, IT and the sciences.
Businesses registered for VAT at a high-volume address will be asked by HMRC to prove they are established in the UK.
High-Volume Addresses
A high-volume address is where a single UK address is listed as the principal place of business (PPOB) for many VAT-registered businesses. We understand that many thousands of businesses are registered at single addresses in the UK.
HMRC will require proof of a place of belonging in the UK to avoid online marketplaces failing to account for output tax.
Online marketplaces
Online marketplaces are liable for the output VAT from sales on their platforms by overseas traders. HMRC understand that Non Established Taxable Persons (NETPs) have incorporated in the UK and provided UK address details to marketplaces. Since they are then no longer “overseas traders” these rules do not apply. In these situations, the NETP does not declare VAT and the marketplace does not become liable for it.
HMRC is writing to all VAT registered businesses with a PPOB at a high-volume address to ask for evidence to demonstrate that the business is actually established in the UK. If the business does not respond, by default, HMRC will consider the business to be a NETP and seek to recover VAT from the online marketplace business.
Evidence of UK establishment
HMRC will outline what specific evidence it will accept in their letter.
Latest from the courts
In the Impact Contracting Solutions Limited (ICS) Upper Tribunal (UT) case the issue was whether HMRC had the power to cancel the VAT registration where that person has facilitated the VAT fraud of another ie; the scope of the “Ablessio” principle. It also illustrates the impact of EU cases on UK courts.
Background
ICS’s customers were temporary work agencies, and its suppliers were approximately 3,000 mini-umbrella companies (“MUCs”) which supplied labour. HMRC decided to cancel ICS’s VAT registration number with reliance on the principle in the decision of the Court of Justice of the European Union (CJEU) in Valsts ienemumu dienests v Ablessio SIA (C-527/11) (“Ablessio”). HMRC considered that ICS was registered for VAT principally or solely to abuse the VAT system by facilitating VAT fraud, and that, in such circumstances, they were empowered by the principle in Ablessio to cancel the registration. In particular, HMRC considered that the arrangements between ICSL and the MUCs were contrived, with the effect that the MUCs failed properly to account for VAT on their supplies to ICS.
ICS appealed against HMRC’s decision to cancel its registration.
The Issues
Does the principle in Ablessio apply only to a party that has itself fraudulently defaulted on its VAT obligations, or does it similarly apply to a party who has facilitated the VAT fraud of another party?
If the Ablessio principle does apply to a party who has facilitated the VAT fraud of another party, is simple facilitation sufficient, or must it additionally be proved that:
(a) the facilitating party was itself dishonest, or
(b) the facilitating party knew that it was facilitating the fraud, and/or
(c) the facilitating party should have known that it was facilitating the fraud?
The First Tier Tribunal (FTT) decided that Ablessio applies both to a party that has fraudulently defaulted on its VAT obligations and to a party who has facilitated the VAT fraud of another party. Further that simple facilitation by a party of the VAT fraud of another is not sufficient to apply the Ablessio principle. However, it is not necessary to prove that the facilitating party was itself dishonest. It must, however, be proved that the facilitating party knew or should have known that it was facilitating the VAT fraud of another party.
Decision
The appeal was rejected an the FTT’s decision was upheld. HMRC powers are not contrary to UK VAT legislation.
The application by HMRC of Ablessio is not contra legem or otherwise prohibited by the VAT legislation where it is applied to deregister a taxpayer who has either fraudulently defaulted on its VAT obligations or facilitated the VAT fraud of another party and at the relevant time has also made taxable supplies unconnected with such fraud or facilitation of fraud and which would result in a liability to be registered.
Ablessio applies to the deregistration by HMRC of a person as well as to a refusal by HMRC to register a person. It also provides for the deregistration of a person who has facilitated the VAT fraud of another, where the person to be deregistered knew or should have known that it was facilitating the VAT fraud of another.
Commentary
This decision was released this month and illustrates the ongoing influence of EU legislation and cases, “despite” Brexit
EU legislation does not, by itself, fall within the scope of retained EU law (see below). However, domestic legislation implementing EU rules forms part of EU-derived domestic legislation and is preserved in domestic law.
The VAT Act 1994 is not affected by Brexit because it is an Act of Parliament and, therefore, remains effective unless it is changed by Parliament.
Overview of the impact of EU legislation
Post-Brexit, the UK could have decided that UK courts should not be bound by EU case law. However, this would have resulted in a situation where the UK courts effectively had to begin with a blank piece of paper in deciding how a piece of retained EU law should be interpreted or applied. This approach would have resulted in considerable uncertainty for business over how retained EU law would operate. In order avoid this, section 6 of the European Union (Withdrawal) Act 2018 provides that:
Going forward
Helpful guidance is provided in the e-Accounting Solutions vs Global Infosys case (not a VAT case).
The Retained EU Law (Revocation and Reform) Act 2023 means that the principle of EU-law conforming construction is a corollary of the supremacy of EU law (which is abolished under Section 3 of the Act) and will therefore no longer apply from 2024.
The principles of statutory construction under English Law require a purposive interpretation of legislation, whether or not EU law principles are engaged. This involves considering the context in which the legislation was made. Depending on the legislation concerned, this process may be guided by “external aids”. External aids referred to in the judgment include Explanatory Notes and Government White Papers, and could also presumably include references to Hansard where seen as appropriate by the courts. To the extent that domestic enactments were made for the purpose of implementing EU law, the EU law position is such an “external aid” and the UK law should be construed accordingly.
Where Parliament used the same language as the Directive, one may assume that it intended to mean the same – accordingly, the CJEU interpretation of Directive-terms informs the interpretation of the UK statute.
However, the statutory language remains paramount – “external aids”, to which EU law instruments are effectively downgraded in UK law from 2024, cannot displace unambiguous statutory language in UK enactments that is inconsistent with EU law.
Whether a service is “related to land” is important because there are distinct rules for this type of supply compared to the General Rule. The place of supply (POS) of land related services is where the land is located, regardless of where the supplier or recipient belong.
The rule applies only to services which relate directly to a specific site of land. This means a service where the land is a central and essential part of the service or where the service is intended to legally or physically alter a property.
It does not apply if a supply of services has only an indirect connection with land, or if the land related service is only an incidental component of a more comprehensive supply of services.
What is land?
For the purpose of determining the POS, land (also called immoveable property in legislation) means:
What services directly relate to land?
HMRC provide the following examples:
The following HMRC examples are not deemed to be land related services:
These examples are mainly derived from case law and the department’s understanding of the legislation and they are not exhaustive.
The Reverse Charge
If an overseas supplier provides land related services in GB, the POS is GB and the reverse charge applies if the recipient is GB VAT registered.
If a GB supplier provides services directly related to land where the land is located outside GB, the POS is not GB. This means that there is a supply in another country. VAT rules in different countries vary (even across the EU) – some countries use the reverse charge mechanism, but others require the GB supplier to VAT register in the country of the POS (where the land is physically located).
A key feature of the place of supply rules is the distinction between B2B (business to business) and B2C (business to consumer) supplies. The distinction is important because it determines, inter alia, whether GB VAT is applicable to a supply made by a GB supplier.
Status of the customer:
To apply the B2B treatment a GB supplier must obtain evidence that the customer has business activities. If the supplier cannot obtain any evidence, they should apply B2C treatment.
A supplier needs to identify where his customer belongs in order to establish the place of supply.
VERY broadly, depending on the nature of the supply, the rule of thumb is that a B2B service is GB VAT free (it is subject to a reverse charge by the recipient as it is deemed to be “supplied where received”) but a B2C service is generally subject to GB VAT, regardless of the place of belonging of the recipient. There are exceptions to these rules however, such as the use and enjoyment provisions, land related services, hire of transport and admission to events.
What is digital Euro?
As a digital form of central bank money, the digital Euro will offer greater choice to consumers and businesses in situations where physical cash cannot be used. However, the digital euro would be a complement to cash, which should remain widely available and useable.
A digital Euro would offer an electronic means of payment that anyone could use in the euro area. It would be secure and user-friendly, like cash is today. As central bank money issued by the ECB, it would be different from “private money”, but you could also use a card or a phone app to pay with digital euro. It is intended to provide an anchor of stability for our money in the digital age.
Further details here.
Latest from the courts
In the First-Tier Tribunal case of Sports Invest UK Ltd the issue was the place of supply (POS) of a football agent’s services (commission received for a player’s transfer).
The POS is often complex from a VAT perspective and depends on the place of belonging (POB) of the supplier and the recipient of the supply. These rules determine if VAT is charged, where VAT is charged and the rate of VAT applicable, additionally, they may impose requirements to register for VAT in different jurisdictions.
Background
Sports Invest was a football agent based in the UK. It received fees in respect of negotiating the transfer of a player: João Mário from a Portuguese club: Sporting Lisbon to an Italian club: Internazionale (Inter Milan). The appellant signed a representation contract with the player which entitled it to commission, and a separate agreement with Inter Milan entitling it to a fee because the player was permanently transferred.
The Issues
To whom did Sports Invest make a supply – club or player? What was the supply? Was there one or two separate supplies? What was the POS?
As appears normal for transactions in the world of football the contractual arrangements were complex, but, in essence as a matter of commercial and economic reality, Sports Invest had agreed the commission with the player in case it was excluded from the deal. However, this did not occur, and the deal was concluded as anticipated. Inter Milan paid The Appellant’s fee in full, but did this affect the agreement between Sports Invest and the player? That is, as HMRC contended, did Inter Milan pay Sports Invest on the player’s behalf (third party consideration) such that there were two supplies; one to the player and one to the cub?
The FTT stated that there was no suggestion that the contracts were “sham documents”.
VAT Liability
The arrangements mattered, as pre-Brexit, a supply of services by a business with a POB in the UK to an individual (B2C) in another EU Member State would have been subject to UK VAT; the POS being where the supplier belonged. HMRC assessed for an element of the fee that it saw related to the supply to the player. The remainder of the fee paid by the club was accepted to be consideration for a UK VAT free supply by the agent to the club (B2B).
Decision
The court found that there was one single supply by The Appellant to Inter Milan. This being the case, the supply was B2B and the POS was where the recipient belonged and so that the entire supply was UK VAT free. There was no (UK) supply to the individual player as that agreement was superseded by the contractual arrangements which were actually put in place and the player owed the agent nothing as the potential payment under that contract was waived.
The appeal against the assessment was upheld.
Commentary
The court’s decision appears to be logical as the supply was to the club who were receiving “something” (the employment contract with the player) and paying for it. The other “safeguarding” agreement appeared to be simple good commercial practice and was ultimately “not required”. This case highlights the often complex issues of; establishing the nature of transactions, the identity of the recipient(s), agency arrangements, the POS and the legal, commercial and economic reality of contracts.