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Weekly VAT News - 10/07/2017

Glencore Hungary: interest payable following Hungarian investigation – CJEU
In September 2011, Glencore Agriculture Hungary Kft. claimed input tax of EUR 12.4m from the Hungarian tax authorities ("HTA"). The HTA investigated the claim, requested a large amount of data from Glencore, and within a few weeks imposed penalties for failure to provide it. Two years later, in November 2013, the HTA finally repaid EUR 5.9m. It appears that Glencore's contribution to the delay in completing the investigation was relatively trivial, and in those circumstances the CJEU has decided that Hungarian rules limiting interest to a period following the formal completion of the investigation (applicable where fines have been imposed) infringed the principle of fiscal neutrality. The Court concluded that, although a repayment might be delayed pending investigation, a taxpayer should be entitled to interest if the investigation took too long. To discuss the case please contact Mark Howard on 020 7303 8102.

Littlewoods: compound interest hearing – Supreme Court
The Supreme Court has considered two of the issues arising in Littlewoods’ compound interest appeal. The first issue concerned whether s.78 VATA (interest) should be read together with s.80 VATA (output tax claims) as a coherent tax code, meaning that restitutionary claims for compound interest are prevented by statute. The Supreme Court has reserved its judgment. A finding in HMRC’s favour would mean that Littlewoods has to establish that payment of simple interest is contrary to EU law, in order for its claim to have any chance of success. Detailed arguments from the parties on this second issue, in particular on the meaning of “adequate indemnity”, led the Supreme Court to ask whether another reference to the CJEU was required. The parties were in agreement that, if the Court was minded to refer the matter to Europe, there was no point in considering the other issues. The Supreme Court normally takes around 3 months to deliver its judgment, although the summer recess and the possibility of a reference may impact the timetable. To discuss the case or its implications, please contact David Walters on 0113 292 1552.

RGEX-Geissel & Butin: German invoicing rules too restrictive – AGO
In a number of recent decisions, the CJEU has found that irregularities in VAT invoices should not deny input tax recovery to customers. In RGEX-Geissel and Butin, two car dealers in Germany were purchasing cars from suppliers who only showed letterbox addresses on their invoices. AG Nils Wahl considers that German rules which require the principal place of business to be shown on any invoice are too strict: a letterbox address is a valid address for the purposes of the invoicing rules in the Principal VAT Directive. The AG recognises that the German tax authorities may have had some doubts as to whether the suppliers would account for VAT properly, and noted that input tax recovery can be compromised where a customer “knew or should have known” that a transaction was connected with fraud. However, this principle did not allow tax authorities effectively to transfer their investigative responsibilities to taxpayers. A car dealer cannot be expected to visit the principal place of business of each supplier, especially when modern business practices mean that businesses are increasingly mobile. To discuss the case, please contact Darren Hattersley on 0113 292 1739.

VAT Notes 2017 Issue 2: payable orders to be phased out
In VAT Notes 2017 Issue 2, HMRC have announced that they will be phasing out repayments by payable orders. Unless HMRC changes its current practice on overseas bank accounts, some overseas businesses may in due course need to open UK accounts in order to receive any refunds.

This publication has been written in general terms and we recommend that you obtain professional advice before acting or refraining from action on any of the contents of this publication. Deloitte LLP accepts no liability for any loss occasioned to any person acting or refraining from action as a result of any material in this publication.

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