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Weekly VAT News - 17/07/2017

Boehringer Ingelheim Pharma: manufacturer rebates paid to third parties – AGO  
In Germany, pharmaceutical manufacturers are obliged by law to pay rebates to public and private health insurers. Unlike the public health insurance fund, private health insurers do not buy and sell the drugs – they just pay for them. The German tax authorities decided that Boehringer should not therefore adjust its output tax position in relation to rebates paid to private health insurers, as they were insufficiently linked to the supply chain.
AG Evgeni Tanchev disagreed. In his Opinion, there was no real difference between supplies of drugs through the two channels. In both cases, Boehringer knew that, by law, it would have to rebate 7% of its total sales. Applying Elida Gibbs, Boehringer should account for VAT by reference to amounts received, which meant adjusting for rebates which it was obliged by law to pay, even if they were paid to third parties. If the CJEU endorses the AG’s Opinion, then the current treatment of rebates paid to third parties, particularly where they are required by law, will have to be reconsidered (the UK intervened in the hearing, in support of Germany). Some businesses may find that they have over-accounted for output tax. To discuss the case please contact Simon Atkins on 020 7007 2348.

London Borough of Ealing
: sporting exemption claims - CJEU

The UK is allowed to make the sporting exemption for the not-for-profit ("NFP") sector subject to there being no distortion of competition with commercial providers.
The CJEU has ruled on two arguments raised by London Borough of Ealing that the UK did not implement the Principal VAT Directive correctly. On one hand, the CJEU confirmed that Member States could apply the exclusion even if they treated certain sporting activities as subject to VAT in 1989 (when the rules in this area changed). It did not matter that the UK applied the exemption to some sporting activities but not to others at that time. However, the CJEU found fault with the UK on how it had implemented the condition. In effect, the UK had excluded all local authorities from exemption, but not other NFP operators. The CJEU observed that the exemption was meant to be more easily available to local authorities and “bodies governed by public law” than to other NFP operators. Therefore, the UK could only apply distortion of competition to local authorities if it also did so to bodies which were not governed by public law. As the UK did not consider distortion of competition for other NFP operators, its application of a blanket distortion of competition condition to exclude all local authorities from the sporting exemption is incompatible with the Principal VAT Directive. To discuss the case, please contact Mark Dyer on 0121 695 5897.

ABC Ltd & Ors
: temporary approval under the AWRS – Court of Appeal

Under the Alcohol Wholesalers Registration Scheme (“AWRS”) which came fully into force in April 2017, wholesalers of alcohol have to be approved as “fit & proper” in order to continue trading. Businesses like ABC Ltd which have been refused approval risk going out of business, given the length of time it takes any appeal to be heard by the Tribunals and Courts. The
Court of Appeal has, however, identified that HMRC have the ability to grant temporary approval to traders pending resolution of any appeal. It recognises that they are likely to do so only rarely, but it is interesting to note the Courts expecting HMRC to consider temporary approval rather than succeeding almost by default. To discuss the case, or its implications, contact Eleanor Caine on 0161 455 6303.

Deloitte European VAT Refund Guide 2017

Non-resident businesses can incur significant amounts of VAT on expenses such as hotel bills, trade fairs, and exhibitions. In principle, businesses should be able to recover some or all of the VAT incurred. The
2017 edition of Deloitte’s European VAT Refund Guide (updated to 1 May 2017) covers the rules and procedures to obtain a VAT refund in 31 European countries.

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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