Country-specific updates: UK

Tax authority revises its policy on VAT refunds for overseas businesses which have been unable to obtain a certificate of status in time:

In a change of policy, the tax authority is to allow non-EU overseas businesses to claim VAT refunds where those businesses have had difficulties acquiring certificates of status because of delays caused by the relevant issuing authority dealing with exceptional one-off events such as a global pandemic.  Other examples of exceptional events are given such a government shutdown.

The Brief advises that HMRC will accept late certificates where the official authority could not issue a certificate in good time. In these circumstances, businesses will need to submit the certificate to the UK tax authority within a ‘reasonable time’ after it was issued – which is suggested to be ‘within 30 days’. Businesses may also need to give evidence of the delay, such as information from the official authority’s website, and evidence that they requested the certificate within a reasonable time. All other information and evidence for the claim must still be provided in time. The claim will not be paid until the certificate is produced.

This policy supersedes previous relaxations which extended the deadline for submitting certificates of status for the prescribed year 1 July 2019 to 30 June 2020, first to 30 June 2021 and subsequently to 31 December 2021. Normally, certificates of status are required to be submitted alongside the refund application within six months from the end of the prescribed year.

Gray & Farrar ([2021] UKUT 0293 (TCC))

The tax authority considered the services of an upmarket matchmaking service to high net worth individuals were all standard rated, but the taxpayer had not charged VAT to non-EU residents.

Remaking the First-tier tribunal decision, the Upper Tribunal held that, the predominant element of the supply as judged by the typical consumer was the provision of an introduction to a prospective long-term partner, which contained advice and the provision of information. Thererfore the matchmaking services were ‘services of consultants’ and/or ‘the provision of information’. Accordingly these services fell within the special place of supply rule for business to consumer supplies of certain services (including consultancy services and similar). The effect of this rule is that the supplies to non-EU customers were made outside the EU and were therefore outside the scope of VAT (the disputed periods are pre Brexit).

DLA Piper comment:

Post Brexit, the special place of supply rule for B2C consultancy (and similar) services supplied to non-EU customers now applies to supplies made to any non-UK customers.

Hotel la Tour ([2021] UKFTT 0451 (TC))

The taxpayer in this case was a company with a subsidiary which owned and operated a luxury hotel.  The taxpayer needed funds to invest in a new hotel.  Its directors decided to sell the hotel it operated through that subsidiary which owned it  to obtain funds to pay off the loan secured against the hotel and to fund the new hotel development.

The taxpayer’s VAT group reclaimed the VAT incurred on professional fees, but the tax authority rejected the claim on the grounds that the professional services were used for the purpose of making an exempt supply of shares rather than for the purpose of a taxable supply.

The tribunal found that that the purpose of the share sale was to fund the taxpayer’s taxable general activities. The professional fees were incurred in order to maximise the selling price of the shares but were not cost components of the price of the shares. The taxpayer was therefore able to look through the share sale and recover its input VAT on professional fees incurred to maximise the selling price of the shares.

DLA Piper comment:

This decision runs contrary to the tax authority’s general policy that input VAT incurred on costs relating to a UK share sale cannot be recovered. It may therefore open up some potential for additional claims of input VAT. It raises the important issue as to whether the underlying commercial rationale behind a supply is relevant to the deduction of imput VAT . This case is a useful example for those seeking to make use of this principle.