EY VAT News week to 27 November 2017

Transcription

1 Click here to view online EY VAT News week to 27 November 2017 Welcome to the latest edition of EY VAT News, which provides a roundup of indirect tax developments. If you would like to discuss any of the articles in more detail, please speak with your usual EY indirect tax contact or one of the people below. If you have any feedback or comments on EY VAT News, please contact Ian Pountney. Previous editions of EY VAT News can be found here. In this edition: Autumn Budget 2017 Indirect tax announcements and access to related materials Court of Justice of the European Union Judgment: Transactions can constitute an abusive practice under the Halifax doctrine in the absence of national provisions and for transactions completed before the Halifax judgment Judgment: Limits applied to the application of Bad Debt Relief are disproportionate Opinion: National legislation which prohibits the retrospective application for exemption for small businesses is in line with EU law Calendar update Court of Appeal Latest appeal updates OTS Letter from the Chancellor to the Office of Tax Simplification (OTS) OECD Social security contributions and consumption taxes give way to personal income taxes, as corporate income taxes fail to recover Autumn Budget 2017 Indirect tax announcements and access to related materials The Chancellor of the Exchequer presented the second Budget of 2017, and the first Autumn Budget in two decades, to the House of Commons on 22 November Our Budget Alert shares our reaction to the Autumn Budget and covers our insights and analysis of its implications for the economy, business, employers and individuals. Further details can be found in the complete Budget Report, and the supporting Overview of Tax legislation and Rates (which sets out the detail of each tax policy measure announced). From an indirect tax perspective, the Budget announcements include:

2 No change in registration and deregistration thresholds These will not be uprated for a period of two years and will remain at the current 85,000 and 83,000 respectively. The two year period ends on 31 March 2020 and in the meantime the government will consult on the design of the VAT threshold. For further information please refer to HMRC's Policy Paper and TIIN: VAT: maintain thresholds for 2 years from 1 April Extension of joint and several liability (JSL) on online marketplaces and displaying VAT numbers online The government will legislate in Finance Bill to extend the scope of existing JSL rules to hold an online marketplace jointly and severally liable for: any future VAT that a UK business selling goods via the online marketplace fails to account for after HMRC has issued a notice to the online marketplace, ensuring that all sellers are in scope any VAT that a non-uk business selling goods via the online marketplace fails to account for, where the business was not registered for VAT in the UK and that online marketplace knew or should have known that that business should be registered for VAT in the UK The government will also legislate in Finance Bill to require online marketplaces to ensure that VAT numbers displayed for third party sellers on their websites are valid. They will also be required to display a valid VAT number when they are provided with one by a third party seller operating on their platform. These requirements will be supported by a regulatory penalty. The changes will have effect on/after Royal Assent of Finance Bill For further information please refer to HMRC Guidance, and TIIN: VAT: extending joint and several liability for online marketplaces and displaying VAT numbers online. VAT refunds to combined authorities, fire and rescue authorities, the Scottish Fire and Rescue Service, and the Scottish Police The government will legislate in Finance Bill , to amend section 33(3) of VAT Act 1994 to include the following bodies/class of bodies in the current VAT provisions which allow for the recovery of VAT: The Scottish Police Authority The Scottish Fire and Rescue Service Combined Authorities Fire and Rescue Service Bodies, which become a function of Police and Crime Commissioners (PCC) This removes the need for individual statutory instruments on the establishment of each new combined authority and PCC Fire and Rescue authorities. The change will have effect on/after Royal Assent of Finance Bill For further information please refer to TIIN: VAT: refunds to combined authorities, fire and rescue authorities. VAT grouping consultation summary of responses At Autumn Statement 2016, the government launched a consultation to gather evidence on whether to make changes to UK VAT grouping provisions. The government will publish a summary of responses document on 1 December The government will consider further the scope of VAT grouping, the issues raised and the impact of any potential changes. VAT fraud in labour provision in the construction sector Aimed at combatting perceived VAT fraud on the provision of labour in the construction sector, the government will publish a technical consultation on draft legislation for a VAT reverse charge in spring 2018, with a final draft of the legislation and guidance to be published by October This follows the conclusion of the consultation announced at Spring Budget A summary of responses to the consultation will be published on 1 December The changes will take effect on or after 1 October VAT: split payment for online payments The government will publish on 1 December 2017 a response document to the call for evidence to develop a split payment model that was launched after Spring Budget 2017.

3 A split payment model would allow VAT to be extracted from online payments in real time. The responses to the call for evidence were broadly positive about the concept but highlighted the complexities of implementation. The response document will set out plans for further engagement with external stakeholders, in preparation for a full consultation in Encouraging compliance by users of digital platforms The government will explore, with digital platforms, how their business operating models work and what opportunities there are to promote better tax compliance by their users, before publishing a call for evidence in spring 2018 on what more, digital platforms could do to prevent non-compliance among their users. The government has previously put obligations on digital platforms to tackle VAT evasion, and expects digital platforms to play a wider role in ensuring that their users are compliant with the tax rules and to minimise opportunities for their users to unfairly undercut businesses that comply with their tax obligations. Imports postponed accounting The government recognises that businesses currently benefit from postponed accounting for VAT when importing goods from the EU, as well as the importance of such arrangements to business due to the cash flow advantage they provide. The government will take this into account when considering potential changes following EU exit and will look at options to mitigate any cash-flow impacts for businesses. VAT and vouchers The government will legislate in Finance Bill to implement certain changes in the VAT treatment of vouchers with effect from 1 January These will simplify the VAT treatment of vouchers, including the point at which they will become subject to VAT, and in some cases their value for taxation. A consultation paper will be published on 1 December Call for evidence on VAT and Air Passenger Duty on tourism in Northern Ireland The government will publish a call for evidence in early 2018 on the impact of VAT and Air Passenger Duty on tourism in Northern Ireland, to report at Budget Gaming duty The government will publish a consultation in early 2018 on gaming duty return periods to seek views on bringing the administration of gaming duty more into line with the other gambling duties. It will also seek views on removal of the requirement to make payments on account. Vehicle Excise Duty (VED) The government will legislate in Finance Bill to increase VED rates for motorcycles and vans, and cars registered before 1 April 2017 and First Year Rates for cars under the post April 2017 VED system, by the Retail Price Index with effect from 1 April The rates are available here. For further information please refer TIIN: Vehicle Excise Duty: rates for cars, vans, motorcycles and motorcycle trade licences from April VED Diesel Supplement The government will legislate in Finance Bill to apply a supplement to new diesel cars registered on/after 1 April 2018, so that the First Year Rate of VED for a new diesel car will go up by one band. The change will apply to all new diesel cars that do not meet the RDE2 standards. For further information please refer TIIN: Vehicle Excise Duty: introduction of the diesel supplement. VED Zero Emission Taxis The government will exempt zero-emission capable taxis from the VED supplement that applies to expensive cars. The government will consult on how to define zero-emission capable taxis, ahead of implementation in April Heavy Goods Vehicle (HGV) VED and HGV Levy The government will freeze rates of VED for heavy goods vehicles (HGVs) for the tax year 2018 to 2019, which includes all rates linked to the basic goods rate. HGV Levy rates will also be frozen for the tax year 2018 to The government will also publish a call for evidence on updating the existing HGV Road User levy. Fuel duty rates Fuel duty rates will remain frozen for the tax year 2018 to Air Passenger Duty The government will legislate in Finance Bill to increase the Air Passenger Duty long-haul standard rate to 172 and the long-haul higher rate to 515 on/after 1 April Short haul rates, and the long haul reduced rate for economy passengers will be frozen at the tax year 2018 to 2019 levels. Rates for the tax year 2020 to 2021 will be set at Budget For further information please refer to TIIN: Air passenger duty: rates from 1 April 2019 to 31 March 2020.

4 Alcohol duty rates The government will freeze all alcohol duty rates. There will be no revisions to existing legislation and no new legal provisions will be introduced. Rates and allowances are available here. New cider duty band The government intends to introduce a new duty band in 2019 for still cider of a strength of at least 6.9% but not exceeding 7.5% alcohol by volume, to encourage the production and consumption of lower-strength ciders. This follows the Alcohol Structures Consultation announced at Spring Budget The government's summary of responses to this consultation will be published on 1 December Legislation will be introduced in Finance Bill and changes will have effect on/after 1 February Wine dilution HMRC will review the practice of diluting wine and made-wine after excise duty has been calculated. The aim is to prevent wine producers from unfairly reducing the excise duty they pay on the larger volume of diluted product, and create consistency with all other alcohol sectors. Tobacco Duty rates The government will legislate in Finance Bill to: Increase the duty rates for all tobacco products by 2% above Retail Price Index inflation from 6pm on 22 November 2017 Increase duty for hand-rolling tobacco by an additional 1% above this 2% increase, to 3% above retail price from 6pm on 22 November 2017 Tobacco duty rates will increase by a minimum of 2% above inflation until the end of this Parliament. The rates are available here. For further information please refer to TIIN: Tobacco products duty rates. Tobacco Minimum Excise Tax The government will legislate in Finance Bill to set the Minimum Excise Tax at per 1000 cigarettes. The change will have effect from 6pm on 22 November The rates are available here. For further information please refer TIIN: Tobacco products duty rates. Customs powers of access The government will legislate in Finance Bill to clarify the powers that allow officers of HMRC to use force to gain access to a locked vehicle, when stopping or searching it, which they suspect contains goods liable to forfeiture. The changes will have effect on/after Royal Assent of Finance Bill For further information please refer TIIN: Power to search vehicles or vessels under section 163 of Customs and Excise Management Act 1979 published on 5 December Customs examination powers The government will legislate in Finance Bill to extend the powers HMRC officers currently have under section 24 of the Finance Act 1994, so they can examine and take account of goods thoroughly, post clearance, inland, where a customs offence is suspected. This will enable an officer to move, open or unpack goods or containers, or require them to be opened or unpacked, and search the containers and anything in them, as well as mark them as necessary. The changes will have effect on/after Royal Assent of Finance Bill For further information please refer TIIN: Customs examination powers published on 5 December Call for evidence on single-use plastics waste The government will launch a call for evidence in early 2018 on how the tax system or charges could help to reduce the amount of single-use plastic waste. Landfill Tax reform The government will legislate in Finance Bill to make changes to the criteria determining when Landfill Tax is due, and to extend the scope of Landfill Tax to disposals of material at sites operating without the appropriate environmental authorisation. This follows consultations in 2016 and 2017 respectively.

5 Draft legislation and TIIN: Landfill Tax: disposals not made at landfill sites were published on 13 September 2017, when the government also confirmed its intention to legislate from 1 April Following consultation, changes have been made to further align the legislation with environmental law and ensure that operators of quarries will not be required to register for Landfill Tax. Statutory instruments will also be required. Draft instruments will be published in December 2017 and laid after Royal Assent to Finance Bill The changes will have effect on/after 1 April Aggregates Levy: rates As announced at Autumn Budget 2017, the rate of Aggregates Levy will be frozen for the tax year 2018 to The rate has been frozen since 2009 and the government will return to index linking the levy in the longer term. This follows the announcement at Spring Budget 2017 that the rate of Aggregates Levy would remain at 2 per tonne in the tax year 2017 to The Aggregates Levy rates on and after 1 April 2017 are available here. Aggregates Levy: consultation on exemption for laying underground utility pipes The government has concluded that the case to introduce a new Aggregates Levy exemption for aggregate which is an unavoidable by-product when laying underground utility pipes is not strong enough at this time. This follows consultation in A summary of responses to the consultation and the government's response will be published on 1 December Landfill Tax: rates for 2019 to 2020 The government will legislate in Finance Bill to increase the standard and lower rates of Landfill Tax in line with the Retail Price Index, rounded to the nearest 5 pence. The change will have effect on/ after 1 April The rates of Landfill Tax on and after 1 April 2017 are available here. Climate Change Levy: main rates The government will set Climate Change Levy main rates for the tax years 2020 to 2021 and 2021 to 2022 at Budget 2018, with the exception of the rate for liquefied petroleum gas. To ensure better consistency between portable fuels in the off-gas grid market, this rate will be frozen at the tax year 2019 to 2020 level in tax years 2020 to 2021 and 2021 to The main and reduced main rates of Climate Change Levy from 1 April 2017 are available here. Climate Change Levy: exemptions for mineralogical and metallurgical processes The government will legislate in Finance Bill to make minor amendments to the way the exemptions from Climate Change Levy for energy used in mineralogical and metallurgical processes are defined. The scope will remain unchanged, but the changes will ensure the exemptions remain operable after EU exit and address business concerns about how the exemptions apply in landlord tenant situations. The changes will have effect from spring The next stage will be the publication of Finance Bill on 1 December Court of Justice of the European Union Judgment: Transactions can constitute an abusive practice under the Halifax doctrine in the absence of national provisions and for transactions completed before the Halifax judgment C-251/16 Cussens and Others On 22 November 2017, the Court of Justice of the European Union (CJEU) released its decision in this Irish referral asking whether certain transactions constitute an abusive practice liable to redefinition under the Halifax doctrine (which addresse s the scope of the EU principle of abuse of rights in the context of VAT), even in the absence of national legislation giving effect to that principle and in circumstances where the transactions were completed before the CJEU judgment in Halifax. Cussens and others (the Appellants) co-owned a plot of land on which they constructed a number of holiday homes. In order to reduce the amount of VAT that would be paid on the sale of the homes, the Appellants concluded a number of preliminary

6 transactions with a related company. The Appellants granted a long term lease for the homes for 20 years and 1 month, subject to VAT on the capitalised value of the lease. The homes were leased back to the Appellants for two years. Within a month both leases were mutually surrendered and full ownership of the homes reverted back to the Appellants. The homes were subsequently sold to third parties with no VAT payable as VAT was only due on the original first disposal, that is the long term lease. The tax authority held that the first disposal, the long-term lease, was artificial and constituted an abuse of rights. That lease should therefore be ignored for VAT purposes and VAT should be charged on the subsequent, higher value, sale to third parties, as if it had been the first disposal. The Appellants appealed and the Supreme Court referred the case to the CJEU. In considering whether the principle that abusive practices are prohibited, regardless of a national measure giving effect to it, the CJEU held that refusal of a right or an advantage on account of fraudulent or abusive acts is simply the consequence of finding that the objective conditions required in order to obtain the advantage sought are not met. Accordingly such a refusal does not require a specific legal basis. With regard to the principles of legal certainty and of the protection of legitimate expectations, the CJEU held that a taxable person, who has created the conditions for obtaining a right in a fraudulent or abusive manner, is not justified in relying on those principles. In cases where the conditions of abuse are fulfilled, a taxpayer cannot then seek to rely on legal certainty or legitimate expectations to somehow legitimise such abuse, even where the transactions occurred prior to the judgment in Halifax. The CJEU clarified that, where an abusive practice has been found to exist, the transactions must be redefined so as to reestablish the situation that would have prevailed in the absence of the transactions constituting the abusive practice. That redefinition, however must not go further than is necessary for the correct charging of VAT and the prevention of tax evasion. In considering whether the transactions in the immediate case essentially pursued the aim of obtaining a tax advantage, the CJEU noted it is necessary to take account of the objectives of the leases entered into. In this regard, it is for the referring court to determine whether the constituent elements of an abusive practice are present. By way of guidance, the CJEU suggested that the referring court should take into account the purely artificial nature of those transactions and the links of a legal, economic and/or personal nature between the operators at issue. In the present case, the leases had no commercial reality and were entered into between connected parties with the aim of reducing the VAT liability on the sale of the property. The principle that abusive practices are prohibited must be interpreted as meaning that supplies such as those in the immediate proceedings are liable to result in the accrual of a tax advantage. Whilst it is for the referring court to determine this, to the extent that the pre-sales transactions are disregarded and subsequent sale of the properties are thus deemed to constitute a first supply, those supplies should be assessed for VAT in accordance with applicable national rules. Comments: Whilst the Halifax doctrine is not new, businesses may wish to consider the detail of this judgment with regard to any arrangements entered into so as to determine the potential to challenge. For further information, please contact Mitchell Moss. Judgment: Limits applied to the application of Bad Debt Relief are disproportionate C-246/16 Di Maura On 23 November 2017, the Court of Justice of the European Union (CJEU) released its decision in this Italian referral regarding limits applied to the application of Bad Debt Relief (BDR). Under EU VAT law, where a business has made supplies of goods or services to customers and has not been paid, it is entitled to make a claim for BDR in respect of the unpaid VAT provided certain conditions are met. In Italy, prior to 2017, VAT BDR claims were only permitted following the conclusion of insolvency proceedings, consequently it is entirely possible for several years to pass before a business is entitled to a VAT repayment. Di Maura adjusted its VAT following non-payment of a supply. The Italian Revenue Agency subsequently raised an assessment plus penalties asserting that taxpayers are only entitled to make an adjustment if it is clearly established that a debt is uncollectible, i.e. only after the failure of insolvency proceedings or of individual enforcement proceedings. That is to say only once it had become certain that the debt would not be honoured, and not following a simple judgment declaring insolvency. Di Maura appealed the decision and the Regional Tax Court referred the case to the CJEU for a preliminary ruling. In agreement with the Advocate General, the CJEU held that whilst Member States may derogate from an immediate adjustment in the event of partial or non-payment, the EU legislature did not confer on them the power to exclude it altogether.

7 To accept that it is possible for Member States to exclude any reduction of VAT would run counter to the principle of the neutrality of VAT. The CJEU considered that whilst it is acceptable to deny the adjustment of VAT for as long as a debt is potentially recoverable, as provided by national legislation in the immediate case, it is clear that the same objective could be achieved by granting the reduction when the taxable person demonstrates a reasonable probability that the debt will not be honoured. In this regard it is for national courts to determine, with due regard to the principle of proportionality, the evidence for a probable extended period of non-payment to be provided by the taxable person, according to the specific features of the applicable national law. In the immediate case, certainty that the debt is definitively irrecoverable can be obtained, in practice, only around ten years later. Such a period inflicts on traders, subject to that legislation, a cash-flow disadvantage compared to their competitors in other Member States, which clearly undermines the objective of fiscal harmonisation. In conclusion, the CJEU held that the VAT Directive does not permit a disproportionate restriction of the possibility of adjusting VAT via a claim for BDR. It does, however, permit Member States to take into account the uncertainties surrounding nonpayment by requiring the taxable person to take certain reasonable measures. However, the requirement that insolvency proceedings be concluded in relation to the customer represents a disproportionate restriction. Comment: This judgment seems to be in line with UK practice but there are a number of countries which could be considered to be applying disproportionate restrictions to the application of BDR. The provisions relating to BDR changed in Italy with effect from 1 January 2017, specifically allowing taxpayers to issue credit notes at the start of the insolvency procedure. This judgment could challenge this revised policy if it is still considered disproportionate in the time a taxpayer is expected to wait. Businesses which have failed to make claims for BDR or had claims refused, in Italy or elsewhere, may wish to consider the implications of this judgment. Opinion: National legislation which prohibits the retrospective application for exemption for small businesses is in line with EU law C-566/16 Vamos On 23 November 2017, the Court of Justice of the European Union (CJEU) delivered the opinion of Advocate General Wahl (AG) in this Hungarian referral asking whether national legislation, which requires an application for exemption from VAT under the small enterprise exemption to be made on commencement of taxable activities, is contrary to EU law. The Hungarian Tax Authority imposed a financial penalty on Mr Vámos for failure to comply with the obligation to register for VAT. Mr Vámos subsequently registered for VAT, and opted for a Hungarian tax exemption scheme for small businesses. The Tax Authority later identified a further VAT debt and imposed additional financial penalties and interest for late payment. The Tax Authority took the view that national law did not allow taxable persons to opt for exemption from VAT retrospectively and Mr Vámos was not therefore entitled to opt for exemption for the period before that date. Mr Vámos challenged that decision on the basis that the Tax Authority should have asked him whether he wished to opt for the application of the exemption to the sales he made before registering as a taxable person, given that he complied with the material conditions to benefit from the scheme. The AG has held that national legislation which prohibits the retrospective application for exemption to small businesses is in line with EU law. The AG points out that EU law allows Member States to implement any of the special tax schemes although they are not obliged to do so. EU law does not specify whether such schemes should be allowed retrospectively. The AG also held that allowing a retrospective application for a special registration could lead to uncertainty regarding the VAT treatment of previous transactions, for example, circumstances where VAT previously paid and reclaimed by a customer needed to be repaid. The AG further considered that by allowing taxable persons who failed to declare the commencement of their activities correctly to then opt for a scheme retrospectively, may give them an unfair advantage due to the ability to choose the most profitable form of VAT registration, distorting competition in their favour. The AG agreed with the Hungarian Tax Authority on this point that this could encourage tax evasion and therefore, cannot be the correct approach to VAT registration. Finally, the Commission argued that obliging an undertaking to pay VAT on sales made before the declaration of the commencement of activities, in addition to an administrative fine, renders the penalty for the failure to declare the commencement of activities excessive, thereby infringing the principle of proportionality. The AG was clear that the requirement to pay VAT which is due but has not already been paid, is not a penalty, but merely the recovery of unpaid taxes. The AG concluded that an administrative fine can be imposed in order to penalise a failure to declare commencement of activities, as long as it is proportionate and passed this point back to the national court to consider further.

8 Comments: This case is a reminder of the importance of identifying and understanding local VAT registration and compliance obligations. Calendar update Thursday 30 November 2017 Opinion C-580/16 Firma Hans Bühler An Austrian referral asking whether Article 141(c) of the VAT Directive is to be interpreted as meaning that the requirement laid down in that provision is not met where the taxable person is resident and identified for VAT purposes in the Member State from which the goods are dispatched or transported, even if that taxable person uses the VAT identification number of another Member State for that specific intra-community acquisition? Opinion C-8/17 Biosafe Indústria de Reciclagens A Portuguese referral asking whether the VAT Directive and the principle of neutrality preclude national legislation which, in circumstances where a VAT inspection finds that the wrong VAT rate has been applied to a supply, the error is corrected and the supplier seeks to obtain the respective additional VAT from the purchaser, sets the time period for the purchaser to deduct the additional VAT from the date of the initial invoice and not from the date of issue or receipt of the correction documents? If answered in the negative, does the VAT Directive and the principle of neutrality preclude legislation which allows the purchaser to refuse to pay the additional VAT, on the basis that refusal of the passing on of VAT is justified where it is impossible to deduct that additional tax? Tuesday 12 December 2017 Delayed C-532/16 AB SEB Bankas A Lithuanian referral asking various questions as to whether an adjustment to VAT is applicable, per Articles 184 to 186 of the VAT Directive, in cases where an initial deduction could not have been made because the transactions in question related to an exempt supply of land. This had been listed for an AG Opinion on 12 December However, whilst no reason has been given, it appears that the opinion has been delayed. Wednesday 13 December 2017 Hearing C-665/16 Gmina Wroclaw A Polish referral asking whether the transfer of ownership of immovable property owned by a municipality of the state in return for payment of compensation, where the property continues to be managed by the municipality, constitutes a taxable supply. Hearing C-544/16 Marcandi Limited T/A Madbid A UK referral from the First-tier Tribunal asking whether the issue of credits to users of an online auction, by Madbid, in return for a monetary payment is a preliminary transaction outside the scope of VAT or a supply of services, namely the grant of a right to participate in an online auction. If a supply of services, is it a supply made for consideration when it issues the credits, if not, is such a supply made at any other time? The referral also asks what, in these circumstances and considering the answers to the initial questions referred, is the consideration received by Madbid for the supply of the goods; Is the credit a payment on account and therefore consideration for a supply of goods, what is the total value of the supply of the goods and what is the effect of unsuccessful bids and credits used? Comment: This is the same business as the Welmory CJEU referral, and the questions being referred this time are questions that were discussed by the AG in Welmory, but never addressed as the judgment went in a different direction. As well as similar businesses, this will be of interest to businesses offering vouchers and promotion schemes, where there may be a read across in terms of the scope and implications for credits. For further information please contact Rosie Higgins. Thursday 14 December 2017 Judgment C-305/16 Avon Cosmetics A UK referral from the First-tier Tribunal in relation to the Avon Cosmetics case (TC03311), on the UK's direct selling or party plan derogation. Specifically, the case concerns a failure of the UK derogation, which deals with retail sales made through non-registered representatives, to provide for any VAT deduction in respect of costs borne by sales representatives, whilst requiring the taxpayer (on selling to those representatives) liable to VAT by reference to the retail open market selling price received by the representatives. The First-tier Tribunal referred the case to the CJEU on the question of whether the derogation was lawful in this respect, and expressed its own opinion that it was not.

9 In April 2016, HMRC issued Revenue & Customs Brief 19/14 which sets out its position following the First-tier Tribunal's decision. In short, the Brief confirms that HMRC remains of the view that the derogation has been applied correctly and that VAT incurred by unregistered representatives of Avon (or other retailers) on their purchase of demonstration items cannot be offset against the VAT due on sales to final consumers. For further information, please contact Mitchell Moss, Andy Richardson, Dermot Rafferty or Ethan Ding. Court of Appeal Latest appeal update As previously reported, permission to appeal to the Court of Appeal has been granted: In the cases of Lloyds Banking Group PLC & Anr v HMRC, Standard Chartered PLC & Anr v HMRC and HMRC & Anr v MG Rover Group Limited. These cases were previously heard by the Upper Tribunal as a joined case. In the case of GI Ltd (formerly Gala 1 Limited) previously heard by the Upper Tribunal. The UT held that the right to make a VAT repayment claim belongs to the representative member of the VAT group even after the real world supplier leaves the VAT group. The Court of Appeal tracker has been updated and reports a revised hearing date for all of the above named cases of 21 January The Court of Appeal has provided notice that judgment is expected on 1 December 2017 in the cases of Iveco Ltd v HMRC. This case concerns whether Iveco's VAT repayment claim, submitted in 2011, in respect of bonus payments made to customers in the period 1978 to 1989 was precluded by any domestic or EU time limit. The Upper Tribunal held that the claim was time-barred allowing HMRC's appeal. OTS Letter from the Chancellor to the Office of Tax Simplification (OTS) The Chancellor of the Exchequer has written to the Office of Tax Simplification (OTS) responding to its recommendations on simplifying the VAT system, which were made in its report published on 7 November The Chancellors letter, which is available here, includes: Agreement to examine the VAT threshold but to maintain it at its current level in the meantime Appreciation of the administrative issues faced by business and the need for clear guidance and rulings. Agreement to ensure progress is made and HMRC is to be asked to consider ways of addressing costs and uncertainty regarding the voluntary disclosure of errors Agreement that the various VAT rates and exemptions are complex, but that the government's ability to amend these is currently limited due to EU law. It is accepted that VAT rates and reliefs should be reviewed over the longer term and HMRC and HMT will engage with the OTS in this regard With regard to concerns raised about the current Capital Goods Scheme and Partial Exemption Regulations, the OTS is encouraged to continue to engage with HMRC and HMT in these areas The merits regarding the on-line handling of Options to Tax is to be considered as part of the introduction of Making Tax Digital for VAT.

10 OECD Social security contributions and consumption taxes give way to personal income taxes, as corporate income taxes fail to recover Personal income taxes are playing an increasingly significant role in the tax mix as revenues from social security contributions and consumption taxes fall, and corporate tax collections remain low, according to a new OECD report. Revenue Statistics 2017 shows that, on average, OECD countries are becoming more reliant on personal income tax (PIT) revenues, with social security contributions (SSCs) and taxes on goods and services declining as a share of total tax revenue. The average share of PIT in total taxation increased from 24.1% in 2014 to 24.4% in 2015, while the respective shares of SSCs and taxes on goods and services (including VAT) fell slightly, according to the report. Corporate income taxes, which fell significantly during the financial crisis, have not recovered, remaining flat at around 8.9% of revenues. The OECD press release provides further details and a useful interactive map to quickly compare revenue statistics by country. EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transactions and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In doing so, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. Ernst & Young LLP Ernst & Young LLP Published in the UK. All Rights Reserved. The UK firm Ernst & Young LLP is a limited liability partnership registered in England and Wales with registered number OC and is a member of Ernst & Young Global Limited. Ernst & Young LLP, 1 More London Place, London, SE1 2AF. Information in this publication is intended to provide only a general outline of the subjects covered. It should neither be regarded as comprehensive nor sufficient for making decisions, nor should it be used in place of professional advice. Ernst & Young LLP accepts no responsibility for any loss arising from any action taken or not taken by anyone using this material. ey.com/uk Important commercial notice: This may constitute an advertisement or solicitation under US law, if its primary purpose is to advertise or promote Ernst & Young LLP s products or services. Our principal postal address is 1 More London Place, London SE1 2AF. Please click here to remove this from the subscription for this communication. Use the link below to opt-out if you would prefer not to receive any advertising or promotional from Ernst & Young LLP (except for EY Online and the ey.com website, which track preference through a separate process). Your address will be immediately removed from our central mailing list for newsletters and alerts, and all s from Ernst & Young LLP designated as advertising or promotional will be automatically blocked as soon as necessary. Click here to remove yourself from all Ernst & Young LLP commercial s.