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.