Innovation Rehab Limited v The Commissioners for HMRC
[2023] UKFTT 472 (TC)
Pirmal Healthcare UK Limited v The Commissioners for HMRC
17 October 2023
[2023] UKFTT 891 (TC)
First-tier Tribunal
A company imported goods and did work on them, but didn't own the goods. The government said they couldn't claim back the import tax. The court mostly agreed, but said the government hadn't treated the company fairly compared to other similar companies, so they could get some of the tax back.
Key Facts
- •Piramal Healthcare UK Limited (Piramal) imports pharmaceutical goods, paying import VAT, but the supplier remains the owner.
- •Piramal provides services related to these goods (processing, research, testing) and invoices customers for these services.
- •Piramal did not make onward supplies of the goods themselves.
- •HMRC denied Piramal's input tax credit for import VAT, leading to assessments and withholding of repayments.
- •Piramal appealed, arguing the import VAT was a valid input tax credit and that HMRC's actions breached the EU principle of equal treatment.
Legal Principles
Input tax definition
Value Added Tax Act 1994 (VATA), s 24(1)
Entitlement to credit for import VAT
VATA, s 25 & s 26
Import VAT for goods partly for private use
VATA, s 27(1)
Cost component in onward supplies (EU)
Article 2 of Directive 67/22/EEC; Article 168 of Directive 2006/112/EC (PVD)
EU principle of equal treatment
Marks & Spencer Plc v Revenue & Customs Commissioners (Case C-309/06)
Outcomes
Appeal regarding import VAT as input tax credit rejected.
Import VAT is only an input tax credit if goods form a cost component of a taxable supply; Piramal’s goods remained the customer's property and were not a cost component.
Appeal regarding withholding of VAT repayment rejected.
Same as above.
Appeal regarding assessment for overclaimed VAT allowed partially.
HMRC's actions breached the principle of equal treatment; Piramal should have been granted a transitional period from 2 August 2018 (when HMRC's position was clear), allowing input tax credit for VAT incurred up to 5 November 2018.
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