The Upper Tribunal (UTT) decided that VAT incurred on the receipt of certain postal services is not recoverable.
Brief background
It is estimated that businesses could have recovered more than £220 million of credit for input tax on RM’s postal services had the decision gone in their favour.
It has previously been decided that certain supplies made by Royal Mail (RM), including Parcelforce, to its customers were taxable. This was on the basis of the TNT CJEU case. RM had treated them as exempt. HMRC was out of time to collect output tax, but claims made by recipients of RM’s services were able to make retrospective claims. These claims were predicated on the basis that the amount paid to RM included VAT at the appropriate rate (it was embedded in the charge) and that UK VAT legislation stipulates that the “taxable amount” for any supply, is the amount paid by the customer including any VAT included in the price.
Decision
The UTT has agreed with the verdict in the FTT hearing that the appellant: Zipvit Limited (along with many other taxpayers) was unable to recover input tax claimed to be embedded the value of the supply by RM. Regardless of the arguments on the embedded input tax point (and interesting comments on the absence of a correspondingly equal amount declared as output tax by RM) the UTT agreed with the overall finding by the FTT. Although a This is a highly technical issue, the deciding point was the simple fact that as the claimant did not have valid tax invoices to support the claim it was invalid. Additionally, it was decided that although HMRC may consider alternative evidence, in these circumstances they were not obliged to accept other documentation and that Zipvit’s claim therefore failed.
Action
We are aware of many appeals being stood behind Zipvit. This case clearly is unhelpful for claims, but it may not be the end of the process. We will advise on any further progress of the appeal when that information is available.
Please contact us if you have any queries on this case.
Full case here Zipvit Limited