Key Facts
- •Golf Holidays Worldwide Ltd. (Golf) appealed HMRC's rejection of an error correction notice (ECN) for overpaid output tax (periods 03/17 to 03/21).
- •Golf used the Tour Operators Margin Scheme (TOMS) for wholesale supplies, believing this to be an error under Regulation 35 of the Value Added Tax Regulations 1995.
- •HMRC rejected the ECN, arguing no error was made as using TOMS for wholesale supplies was a lawful option under UK law, interpreted in conformity with EU law (MarLeasing principle).
- •Golf argued that HMRC's interpretation of MarLeasing amounted to rewriting UK legislation and that Brief 05/14 (HMRC guidance) supported their position that wholesale supplies were outside TOMS under UK law.
- •Golf also argued HMRC's refusal to allow the error correction amounted to an unauthorized imposition of direct effect and a breach of fiscal neutrality.
Legal Principles
Error correction under Regulation 35 of the VAT Regulations 1995
Value Added Tax Regulations 1995, Regulation 35
Interpretation of EU law and its direct effect in UK law (MarLeasing principle)
MarLeasing SA Case C-106/89
Direct effect of EU law and its applicability by the State against individuals (Ursula Becker principle)
Ursula Becker v Finanzamt Munster-Innenstadt (Case C-8/81)
Fiscal neutrality in the UK VAT system
Implicit in the common system of VAT; relevance post-Brexit considered.
'Error' in Regulation 35 does not encompass choosing a less advantageous lawful option.
Victoria and Albert Museum Trustees [1996] STC 1016
Outcomes
Appeal dismissed.
Golf did not make a relevant error under Regulation 35. Using TOMS was a lawful choice, even if less advantageous. HMRC did not impose direct effect; Golf chose to use it. No breach of fiscal neutrality existed because a choice of methods was available.