Revenue and Customs Commissioners v Ampleaward Ltd
| Jurisdiction | England & Wales |
| Neutral Citation | [2021] EWCA Civ 1459 |
| Year | 2021 |
| Court | Court of Appeal (Civil Division) |
[2021] EWCA Civ 1459
Lord Justice Lewison, Lord Justice Birss and Sir Christopher Floyd
Court of Appeal (Civil Division)
Value added tax – Place of supply – Construction of VATA 1994, s. 18(3) in the light of the Principal VAT Directive – Whether s. 18(3) limited to goods warehoused in the UK – No – Appeal allowed.
The Court of Appeal unanimously confirmed a decision of the UT that VATA s. 18(3) extended the VAT exemption for warehoused excise goods beyond the scope permitted by EU legislation. It ruled that the correct remedy for this would be for parliament to amend VATA, not (as HMRC argued it should) to read s. 18 down to comply with EU legislation.
A Ltd traded in alcoholic liquor. In summary:
- A Ltd purchased liquor which was subject to an excise warehousing regime (i.e. the duty point had not yet crystalized) from a supplier in an EU member state;
- The liquor was delivered to a second EU member state while still in bond. A Ltd was not registered for VAT in the member state of delivery and used its UK VAT number to enable the supplier to treat the sale as an intra-EU dispatch of goods;
- While it was in the member state of delivery the alcohol was sold to a customer located in a third EU member state and, after sale, it was delivered to the customer.
For reasons not connected to this case A Ltd was not registered for VAT in the member state of delivery.
The case concerned transactions which took place before 1 January 2021. At the relevant time the former VATA s. 13(2) provided that, unless it could be shown that VAT was paid in another EU jurisdiction, where a UK VAT number was used in order to secure zero rating of an intra-EU dispatch of goods, acquisition VAT was due in the UK even if those goods were not delivered to the UK.
However, the former VATA s. 18(3) overrode s. 13(2) in some circumstances by providing that where goods were subject to a warehousing regime their supply and acquisition was deemed to take place outside the UK. S. 18(6) provided that “warehouse” included “any warehouse where goods may be stored in any member state”.
HMRC assessed A Ltd for acquisition VAT in the UK on the grounds that, because its UK VAT number had been quoted on the EU supplier's sales invoice, the effect of s. 13(2) was that VAT was due in the UK even though the goods had not been delivered to the UK.
A Ltd challenged the assessment on the ground that, because the goods were subject to a warehousing regime, s. 18 applied and the goods were deemed to have been acquired outside the UK.
HMRC argued that s. 18 did not apply in this case because the goods were physically outside the UK at all times. HMRC's view was that s. 18 should be read down such that it conformed with the Principal VAT Directive (PVD). The VAT exemption for warehoused goods is contained in Directive 2006/112 art. 157 and art. 162. The Court of Appeal (agreeing with the UT) accepted HMRC's argument that the PVD permitted member states to apply the exemption to warehouse goods in their own territories, and that, because it applied to goods warehoused in any member state, s. 18(3) extended the exemption's scope beyond what was permitted.
However, like the UT before it, the court dismissed HMRC's case. It ruled that because s. 18(6) specifically stated that it applied to goods warehoused in any member state, it should be interpreted to that effect and that, therefore, A Ltd's goods were not subject to UK acquisition VAT. The proper remedy for s. 18's incorrect implementation of the PVD was for parliament to amend the legislation.
This case is one of several ongoing appeals concerning the VAT treatment of excise goods and the Court of Appeal's clear statement that VATA s. 18 should be read as it is drafted rather than, effectively, disregarding certain phrases in order to achieve an interpretation which conforms with EU law will be welcomed by taxpayers involved in those other appeals.
Ms Natasha Barnes & Mr Paul Reynolds (instructed by HMRC Solicitors Office) appeared for the appellant
Mr Kieron Beal QC (instructed by Morrisons Solicitors LLP) appeared for the respondent
[1] The issue on this appeal is the correct VAT treatment of supplies of alcohol involving multiple jurisdictions. The question is whether the United Kingdom can charge acquisition VAT on purchases by a UK VAT registered trader of excise goods held in a bonded warehouse in another member state of the EU in circumstances where those goods: (i) never enter the UK in the course of that transaction; and (ii) are sold on while in the bonded warehouse to a customer who is not registered for VAT in that other member state.
[2] On 19 August 2016, HMRC notified Ampleaward of its assessment of tax stating that because it had not provided evidence to show that acquisition tax on the acquisitions of alcohol had been accounted for in the EU member state of destination, HMRC had assessed Ampleaward for acquisition tax of £1,308,648 for the VAT period 09/12 to 03/16. Ampleaward unsuccessfully appealed against that assessment to the FTT; but the UT allowed its appeal from the FTT.
[3] The appeal both here and in the tribunals has been conducted on assumed facts which are as follows.
- Ampleaward is an alcohol wholesaler that has at all material times been registered for UK VAT and approved to own excise duty suspended alcoholic goods in tax warehouses in the UK.
- During the period in question, Ampleaward bought alcohol from a supplier (the Supplier) established in a member state of the EU other than the UK (the Supplier Jurisdiction).
- Ampleaward did not, however, take delivery of the alcohol in the UK. Instead, the Supplier delivered the alcohol to a bonded warehouse (with which Ampleaward had an account) located in a third EU member state (the Delivery Jurisdiction).
- The Supplier included Ampleaward's UK VAT registration number in its domestic VAT returns. That enabled the Supplier to treat the sale of the alcohol as an exempt movement of goods across an EU border for the purposes of VAT in the Supplier Jurisdiction.
- Ampleaward was not registered for VAT in the Delivery Jurisdiction. For reasons that are irrelevant to the appeal it did not itself account for VAT in respect of the acquisition of the alcohol in the Delivery Jurisdiction.
- Ampleaward would then on-sell the alcohol to a customer (the Customer) established in a fourth member state (the Customer Jurisdiction). The alcohol would be physically located in the Delivery Jurisdiction at the time of this sale and the Customer was not registered for VAT in the Delivery Jurisdiction.
- All of the above transactions took place at a time when the alcohol was held in duty suspense, so delivery of the alcohol pursuant to those transactions resulted in the alcohol moving from one bonded warehouse to another.
[4] In short, HMRC say that the acquisition of alcohol by Ampleaward on these assumed facts was deemed to be a supply that took place in the UK because Ampleaward used its UK VAT registration number. But Ampleaward cannot take advantage of the regime encompassing alcohol kept in bonded warehouses, because the domestic legislation goes further than EU law permits. They reach that conclusion by construing the relevant domestic legislation in conformity with EU law; and, if necessary, “reading it down” to make it comply. The Upper Tribunal (Miles J and Judge Jonathan Richards) rejected that argument. They held that the domestic legislation was clear; and could not be read down in the way that HMRC proposed. Their decision is at [2020] BVC 534.
[5] I begin by setting out the legislative framework.
[6] The European framework of VAT is contained in the 2006 VAT Directive (2006/112/EEC) (“the Principal VAT Directive” or “PVD”). The general aims underpinning VAT are contained in the recitals to the PVD. I pick out some of them. Recital (4) states:
The attainment of the objective of establishing an internal market presupposes the application in Member States of legislation on turnover taxes that does not distort conditions of competition or hinder the free movement of goods and services. It is therefore necessary to achieve such harmonisation of legislation on turnover taxes by means of a system of value added tax (VAT), such as will eliminate, as far as possible, factors which may distort conditions of competition, whether at national or Community level.
[7] Recital (5) states:
A VAT system achieves the highest degree of simplicity and of neutrality when the tax is levied in as general a manner as possible and when its scope covers all stages of production and distribution, as well as the supply of services.
[8] Recital (7) states:
The common system of VAT should, even if rates and exemptions are not fully harmonised, result in neutrality in competition, such that within the territory of each Member State similar goods and services bear the same tax burden, whatever the length of the production and distribution chain.
[9] Recital (15) states:
With a view to facilitating intra-Community trade in work on movable tangible property, it is appropriate to establish the tax arrangements applicable to such transactions when they are carried out for a customer who is identified for VAT purposes in a Member State other than that in which the transaction is physically carried out.
[10] Recital (36) states:
For the benefit both of the persons liable for payment of VAT and the competent administrative authorities, the methods of applying VAT to certain supplies and intra-Community acquisitions of products subject to excise duty should be aligned with the procedures and obligations concerning the duty to declare in the case of shipment of such products to another Member State laid down in Council Directive 92/12/EEC of 25 February 1992 on the general arrangements for products subject to excise duty and on the holding...
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