Country-specific updates: UK

Taxpayer’s claim Zipvit case is unanimously dismissed by UK Supreme Court: Following a clear CJEU judgment in January this year, in what was the final referral from the UK to the CJEU, the UK Supreme Court has unanimously dismissed the taxpayer’s case.

By the way of background, the taxpayer supplied vitamins and minerals by mail order. The UK’s Royal Mail supplied the taxpayer with a number of postal services under contracts which had been individually negotiated. The contract between the taxpayer and the Royal Mail stated that the price was exclusive of VAT and that any VAT would be paid in addition. At the relevant time, both parties and the UK tax authority believed the supply of all postage services to be exempt. However, later, in TNT Post UK (C-357/07) the CJEU held that the postal services exemption in the VAT Directive applied only to supplies made by the public postal services acting as such and not to supplies for which the terms had been individually negotiated.

Following the judgment in TNT Post UK (C-357/07), the UK tax authority did not require relevant suppliers to account for VAT on past supplies since the recipients of the supplies would mostly have been entitled to recover the VAT. It was therefore considered disproportionately costly and administratively burdensome for the UK tax authority to pursue the output VAT. In addition, the UK tax authority considered that it had created a legitimate expectation on the part of the Royal Mail that it was not required to collect VAT because the UK law at the time stated that the supplies were exempt so that Royal Mail would have had a defence to an assessment. The contract terms provided that the consideration was exclusive of VAT.

The taxpayer however sought to recover input tax in respect of the services it received which should have been treated as taxable supplies, without holding any VAT invoices.

The CJEU concluded in January that VAT could not be regarded as having been included in the price paid by Zipvit and therefore had not been paid. Nor could the VAT be regarded as being due since no request for payment of VAT had been sent to Zipvit. In view of its definitive ruling on the "due or paid" issue, the CJEU did not need to determine a second issue around whether the taxpayer needed to hold a valid VAT invoice and nor did the Supreme Court. The Supreme Court also agreed with the UK lower courts that even if the UK tax authority had exercised a discretion to accept other evidence of payment, it would inevitably and rightly have decided to reject Zipvit’s claim.

The taxpayer’s case is a test case and the total value of claims against HMRC is estimated at between GBP500 million and GBP1 billion.

Deferral of some border controls for imports of goods from EU: the UK government has announced the delay of some border control measures due to come into effect in September 2022. The government’s press release says that it would be wrong to impose new administrative requirements on businesses which may pass on the associated costs to consumers.

A revised implementation date for these measures is not yet specified but the government has undertaken to publish a target operating model in Autumn 2022. This is to set out a new regime of border import controls (applicable to all imports, including from outside the EU), for which the target introduction date is the end of 2023. Controls that have already been introduced remain in place but introduction of the following controls will be deferred:

• A requirement for further Sanitary And Phytosanitary (SPS) checks on EU imports currently at destination to be moved to Border Control Post.
• A requirement for safety and security declarations on EU imports.
• A requirement for further health certification and SPS checks for EU imports.
• Prohibitions and restrictions on the import of chilled meats from the EU.

The border operating model is to be updated to reflect this announcement.