Why taxpayers should consider making protective claims for VAT refunds, pending the appeal in Adam Mather, by Alan Sinyor (Berwin Leighton Paisner)
Following on from Charlotte Brown’s excellent article about the FTT decision in Adam Mather [2014] UKFTT 1062 (TC), we thought it might be worthwhile updating readers on recent developments.
By way of background, the case calls into question HMRC’s policy, implemented throughout the UK telecoms industry, of charging VAT on the full price of a call to someone outside the EU. Arguably, 50% of the ‘effective use and enjoyment’ of the telecoms service arises where the callee is located. If so, then, pursuant to VATA 1994 Sch 4A para 8, only 50% of the price of the call should be chargeable to UK VAT. If that proposition is correct, then almost every business, charity and individual in the UK will have overpaid VAT to their telecoms providers.
HMRC, with the object of preventing the substantive issue from being litigated, has refused (despite numerous requests) to give Mr Mather a decision (i.e. express its view) on the VAT treatment of the calls. This is despite the fact that its view – that the effective use and enjoyment is limited to that of the caller – is clear from the relevant HMRC notice. Without an HMRC ‘decision’, the FTT has no jurisdiction to hear the case; and that was one reason why the FTT decided that it had no jurisdiction and accepted HMRC’s strike out application.
We have applied for permission to appeal to the Upper Tribunal against the decision of the FTT to strike out the case. In our view, the FTT decision contains several mistakes of law and we are cautiously optimistic that we will be able to convince the UT to reinstate the case and enable the FTT to consider, finally, the substantive arguments.
In the meantime, every UK individual, charity and business (whether fully taxable or not) who has made calls to persons outside the EU should consider taking action to protect their rights to a VAT refund, if and when we win on the substantive issue. That would involve sending an email to the telecoms provider, putting them on notice that the customer will be seeking a full refund of any overcharged VAT. Also, it would be prudent to send a carefully drafted letter to HMRC to protect against time limits on making a ‘Danfoss claim’ to obtain a refund directly from HMRC, if and to the extent that such a refund cannot be obtained from the telecoms provider.
Why taxpayers should consider making protective claims for VAT refunds, pending the appeal in Adam Mather, by Alan Sinyor (Berwin Leighton Paisner)
Following on from Charlotte Brown’s excellent article about the FTT decision in Adam Mather [2014] UKFTT 1062 (TC), we thought it might be worthwhile updating readers on recent developments.
By way of background, the case calls into question HMRC’s policy, implemented throughout the UK telecoms industry, of charging VAT on the full price of a call to someone outside the EU. Arguably, 50% of the ‘effective use and enjoyment’ of the telecoms service arises where the callee is located. If so, then, pursuant to VATA 1994 Sch 4A para 8, only 50% of the price of the call should be chargeable to UK VAT. If that proposition is correct, then almost every business, charity and individual in the UK will have overpaid VAT to their telecoms providers.
HMRC, with the object of preventing the substantive issue from being litigated, has refused (despite numerous requests) to give Mr Mather a decision (i.e. express its view) on the VAT treatment of the calls. This is despite the fact that its view – that the effective use and enjoyment is limited to that of the caller – is clear from the relevant HMRC notice. Without an HMRC ‘decision’, the FTT has no jurisdiction to hear the case; and that was one reason why the FTT decided that it had no jurisdiction and accepted HMRC’s strike out application.
We have applied for permission to appeal to the Upper Tribunal against the decision of the FTT to strike out the case. In our view, the FTT decision contains several mistakes of law and we are cautiously optimistic that we will be able to convince the UT to reinstate the case and enable the FTT to consider, finally, the substantive arguments.
In the meantime, every UK individual, charity and business (whether fully taxable or not) who has made calls to persons outside the EU should consider taking action to protect their rights to a VAT refund, if and when we win on the substantive issue. That would involve sending an email to the telecoms provider, putting them on notice that the customer will be seeking a full refund of any overcharged VAT. Also, it would be prudent to send a carefully drafted letter to HMRC to protect against time limits on making a ‘Danfoss claim’ to obtain a refund directly from HMRC, if and to the extent that such a refund cannot be obtained from the telecoms provider.
