The position on Acquisition Tax has very much changed since the UK left the EU.
Acquisition Tax is a tax (VAT) due on goods supplied from one EU Member State, to another EU Member State. Goods moved between the EU Member States are known as acquisitions. Since the UK left the EU and moved away from following the EU rule of law, any goods purchased into the UK or sold from the UK are now dealt with as imports or exports, rather than acquisitions within the single market.
Despite leaving the EU, many companies still faced historic acquisition tax claims from HMRC on trades carried out with other EU member states whilst the EU rules on Acquisition Tax still applied.
This position was recently drawn to a conclusion following the result of the HMRC -v- Ampleaward case, which went through the UK Court of Appeal after going through both the First Tier Tax Tribunal and then the Upper Tribunal.
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What was the position previously?
In bonded warehouses within the UK, VAT and duty on goods is suspended. This is not the case in every country, and the rules do vary on a country by country basis.
Previously HMRC had approached many UK companies trading within the EU. HMRC told UK companies that they had to pay VAT on their EU trades to HMRC in the UK, if the company could not show that VAT had been accounted for in the country of trade. Many companies argued that the rules were not as straightforward as HMRC claimed. The companies argued that exemptions applied in certain circumstances and that sums could not be due to HMRC, where they had not been claimed by the authorities in the relevant EU member state in the first place.
What does the decision in the Ampleaward Case say?
Ampleaward challenged HMRC through both the First Tier Tax Tribunal, and when unsuccessful they appealed to the Upper Tax Tribunal. Ampleaward were successful in the Upper Tax Tribunal but HMRC then appealed the decision to the Court of Appeal. HMRC were not successful in their appeal at the Court of Appeal. As the UK has now left the EU, the matter cannot go to the European courts, and the Court of Appeal decision now stands.
HMRC’s position was that where a UK company used their UK VAT number to carry out the trades within bonded warehouses in the EU, these transactions were deemed to take place within the UK. Whilst in the UK bonded warehouses VAT was suspended, within many EU member states VAT was not suspended for trades within a bonded warehouses and it is this non-suspended VAT that would have been due on trades in various EU member states that HMRC were pursuing from UK businesses.
HMRC suggested that the UK law should be read in a number of different ways. The Court of Appeal considered the matter in depth. The UK law permits that goods stored within a warehouse, may be stored without payment of both duty and VAT. In this regard the Court of Appeal did not accept that HMRC were able to pursue UK businesses for VAT where VAT was not suspended under the law of other countries.
The Court of Appeal did not permit HMRC’s appeal, and the outcome is that HMRC are not able to pursue UK companies for VAT payments which would be due in other EU member states where VAT is not suspended.
Does that mean that HMRC cannot pursue businesses for VAT due in other EU member states?
Whilst HMRC cannot pursue UK businesses for tax due in other EU States on their own, there is still a post Brexit exposure where the authorities of certain EU States can instruct HMRC to act on their behalf in pursuing UK businesses for sums due in their country.
The default position for non-EU companies trading in EU countries, is that you are required to appoint a fiscal representative to carry out such trade in that country. Following Brexit however, the UK government signed a mutual assistance arrangement with various EU countries, including France, which means that a UK company is not required to appoint a fiscal representative.
Under this mutual assistance arrangement, if a UK company then owes a large amount of tax in say France (for example VAT), HMRC can still be empowered by the French authorities to recover it on behalf of French customs. This is essentially a quid pro quo for companies from the UK not having to appoint a fiscal representative.
So whilst HMRC can’t claim such taxes as being directly due to them, they are still able to act as a debt collector on behalf of French customs, meaning that UK companies may be still have to be slightly more careful than they think post Brexit.
If you have received a letter from HMRC relating to acquisition tax or are concerned that your business may incorrectly have submitted documentation to HMRC. Please call our team for a confidential discussion about how Altion Law could assist you. Altion Law are specialists at advising and representing parties who have received HMRC correspondence relating to Acquisition Tax from HMRC. If you would like to have a confidential discussion with a member of our team, please either complete an Online Enquiry . Or call us on 01908 414990 and we will be pleased to help you.
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