Global Cellular Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 28 May 2015 |
| Date | 28 May 2015 |
| Court | First-tier Tribunal (Tax Chamber) |
Judge Guy Brannan, Shameem Akhtar
Tim Brown, Counsel, instructed by CTM Litigation & Tax Services, appeared for the Appellant
Christopher Foulkes, Counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the Respondents
Value added tax – Whether supplies took place – Retail receipts for mobile phones and invoices for wholesale purchases – Whether appellant has proved that the supplies took place – Whether “runners” buying phones for the appellant did so as undisclosed agents – Application of Value Added Tax Act 1994 (“VATA 1994”), s. 47(2A) – Whether Kittel test applicable in respect of wholesale transactions – ECJ decision in LVK considered – Appeals in respect of retail receipts dismissed – Appeals in respect of wholesale invoices allowed.
[1] The appellant, Global Cellular Limited (“GCL” or “Global Cellular”), appeals against the denial by the Respondents (“HMRC” or “the Commissioners”) of claims for the recovery of input tax. The input tax claims denied by HMRC relate to the supplies which GCL claims were made to it of mobile telephones by both retail and wholesale suppliers. The wholesale supplies relate only to the VAT period 02/11. The other periods under appeal relate to alleged retail supplies.
[2] The amounts of input VAT denied in respect of each VAT period under appeal are as follows:
1) £266,712.36: period 09/10
2) £103,831.44: period 10/10
3) £283,340.84: period 11/10
4) £157,965.19: period 12/10
5) £110,409.29: period 01/11
6) £23,180.69: period 02/11
[3] HMRC's case is, essentially, that the denial of input tax is justified on two grounds:
a) GCL has failed to demonstrate that the goods were supplied to it ; and/or
b) in relation to receipts/invoices provided by GCL which are not valid VAT invoices, HMRC are entitled to deny a deduction for input tax and HMRC have acted reasonably in the exercise of their discretion pursuant to regulation 29(2) VAT Regulations 1995 in considering alternative evidence of the charge to VAT.
[4] In this appeal Mr Asaf Amber (“Mr Amber”), director and shareholder of GCL, and Ms Benita Wagenheim, former office manager of GCL during the periods material to this appeal, gave evidence on behalf of GCL and were cross-examined.
[5] HMRC called the following witnesses:
1) Mr Pankaj Mandalia – an HMRC officer responsible for extended verification of GCL in relation to periods 11/10, 12/10, 01/11 and 02/11;
2) Mr Andy Eraclides – an HMRC officer responsible for extended verification of GCL in relation to periods 09/10 and 10/10;
3) Ms Monica Coker – an HMRC officer who gave evidence in respect of NZ Electronics Limited (“NZ Electronics”) and Freeway Telecom Limited (“Freeway”) which allegedly supplied GCL in the period 02/11;
4) Mr John Cordwell – an HMRC officer who gave evidence in respect of a business called Call Inn First (“CIF”) which allegedly supplied GCL in the period over 2/11; and
5) Mr Johnny McDougall – European Business Operations Manager of Apple Retail UK Limited;
[6] All the witnesses called by HMRC were cross-examined.
[7] In addition, we were provided with 15 volumes of witness statements and exhibits.
[8] We set out below the relevant statutory provisions of domestic and EU law relevant to the present dispute. These were not in dispute.
[9] Section 1 of VATA provides that VAT will be charged in three scenarios:
a) on the supply of goods or services in the United Kingdom(including anything treated as such a supply);
b) on the acquisition in the United Kingdom from other member states of any goods; and
c) on the importation of goods from places outside the member states,
[10] Section 1(2) VATA provides that VAT on any supply of goods or services is a liability of the person making the supply and (subject to provisions about accounting and payment) becomes due at the time of supply.
[11] Section 3(1) VATA provides that “a person is a taxable person while he is, or is required to be, registered under this Act.”
[12] Section 4 VATA provides that:
(1) VAT shall be charged on any supply of goods or services made in the United Kingdom, where it is a taxable supply made by a taxable person in the course or furtherance of any business carried on by him; and
(2) A taxable supply is a supply of goods or services made in the United Kingdom other than an exempt supply.
[13] Any transfer of the whole of property in goods is a supply of goods (section 5 and Schedule 4 para 1 VATA).
[14] Section 24(1) and (2) of VATA define “input tax” and “output tax”. Pursuant to section 24(1)(a), VAT on the supply to a taxable person of any goods or services used or to be used for the purposes of any business carried on by him is “input tax”. Section 24(1)(c) makes the same provision in respect of VAT paid or payable on the importation of any goods from a place outside the member states. Pursuant to section 24(2), “output tax”, in relation to a taxable person, means (inter alia) VAT on supplies that he makes.
[15] Section 25(2) VATA provides for a tax payer at the end of each prescribed accounting period to be entitled to credit for so much of his input tax as is allowable under section 26, and then to deduct that amount from any output tax that is due from him.
[16] Section 26 VATA provides:
(1) The amount of input tax for which a taxable person is entitled to credit at the end of any period shall be so much of the input tax for the period (that is input tax on supplies, acquisitions and importations in the period) as is allowable by or under regulations as being attributable to supplies within subsection (2) below.
(2) The supplies within this subsection are the following supplies made or to be made by the taxable person in the course or furtherance of his business–
a) taxable supplies …
[17] Section 47 VAT Act 1994 provides:
(1) Where–
a) goods are acquired from another member State by a person who is not a taxable person and a taxable person acts in relation to the acquisition, and then supplies the goods as agent for the person by whom they are so acquired; or
b) goods are imported from a place outside the member States by a taxable person who supplies them as agent for a person who is not a taxable person,
then, if the taxable person acts in relation to the supply in his own name, the goods shall be treated for the purposes of this Act as acquired and supplied or, as the case may be, imported and supplied by the taxable person as principal.
(2) For the purposes of subsection (1) above a person who is not resident in the United Kingdom and whose place or principal place of business is outside the United Kingdom may be treated as not being a taxable person if as a result he will not be required to be registered under this Act.
(2A) Where, in the case of any supply of goods to which subsection (1) above does not apply, goods are supplied through an agent who acts in his own name, the supply shall be treated both as a supply to the agent and as a supply by the agent.
(3) Where services are supplied through an agent who acts in his own name the Commissioners may, if they think fit, treat the supply both as a supply to the agent and as a supply by the agent.
[18] Regulations made under section 24(6) of VATA may provide for VAT on the supply to a taxable person of any goods or services, and VAT paid or payable by a taxable person on the importation of goods from places outside the member states to be treated as input tax only and to the extent that the charge to VAT is evidenced and quantified by reference to such documents as may be specified in the regulations or the Commissioners may direct either generally or in particular cases or classes of cases. Section 24(6) VATA gives effect to article 18 of the VAT Directive, which refers to documentary requirements which must be satisfied in order to exercise a right to deduct.
[19] Part III of the Regulations, “VAT invoices and other invoicing requirements” includes at regulation 13 the “Obligation to provide a VAT invoice” which, so far as is relevant, provides:
(1) Save as otherwise provided in these Regulations, where a registered person–
a) makes a taxable supply in the United Kingdom to a taxable person, or
b) makes a supply of goods or services other than an exempt supply to a person in another member State, or
c) receives a payment on account in respect of a supply he has made or intends to make from a person in another member State,
he shall provide such persons as are mentioned above with a VAT invoice … […]
(5) The documents specified in paragraphs (1), (2), (3) and (4) above shall be provided within 30 days of the time when the supply is treated as taking place under section 6 of the Act, or within such longer period as the Commissioners may allow in general or special directions.
[20] Regulation 14 provides:
(1) Subject to paragraph (2) below and regulation 16 save as the Commissioners may otherwise allow, a registered person providing a VAT invoice in accordance with regulation 13 shall state thereon the following particulars–
a) an identifying number,
b) the time of the supply,
c) the date of the issue of the document,
d) the name, address and registration number of the supplier,
e) the name and address of the person to whom the goods or services are supplied,
f) the type of supply by reference to the following categories–
i) a supply by sale, (…)
ii) a description sufficient to identify the goods or services supplied,
iii) for each description, the quantity of the goods or the extent of the services, and the rate of VAT and the amount payable, excluding VAT, expressed in sterling,
iv) the gross total amount payable, excluding VAT, expressed in sterling,
v) the rate of any cash discount offered,
vi) each rate of VAT chargeable and...
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Kelly and Another (t/a Ludbrook Manor Partnership)
...in passing that this conclusion is consistent with that reached in the FTT (Judge Brannan and Shameem Akhtar) in Global Cellular Ltd TAX[2015] TC 04418 (see [331]–[348]). That case considered a statement at [34] of the CJEU's decision in LVK – 56 EOOD v Direktor na Direktsia “Obzhalvane i u......