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Import VAT repayment – First-Tier Tribunal ruling
A BIFA Member has successfully challenged a decision by HM Revenue & Customs not to refund a payment of excess import VAT
BIFA would like to bring forward an interesting case in which the First-Tier Tribunal (FTT) has released its decision about an appeal raised by one of BIFA’s Members. The appeal challenged HM Revenue & Customs’ (HMRC’s) decision to refuse repayment of import VAT paid in excess as a result of a clerical error on import declaration. The BIFA Member, acting as agent on behalf of its customer (the importer), imported goods into the UK and declared them to Customs. However, due to an incorrect currency code used in the declaration, the amounts of import duty and VAT were overpaid and the agent subsequently submitted form C285 to request repayment.
Letters of authority In the course of the process, HMRC National Duty Repayment Centre replied to the agent in a familiar fashion requesting the importer to provide letters of authority confirming representation type and specifying which party should be repaid.
It also advised the agent that a refund of import VAT as per CIP (11) 14 Import VAT will not
January 2018
be repaid to VAT Registered traders. The equivalent amount should be re-claimed as input tax via the VAT return subject to normal VAT rules.
The importer provided the requested information to the authorities. It also informed HMRC that it would not be reclaiming import VAT through the regular VAT returns procedure in the form of a disclaimer, which is a usual practice in this kind of case.
Subsequently HMRC made a decision to
repay the overpaid duty amount, but at the same time refused to repay the overpaid VAT referring to the aforementioned CIP (11) 14. The process up to this point could be
considered predictable. However, the agent challenged the decision, requesting explanation as to why a disclaimer had been requested if repayment of the VAT was still to be refused. It also pointed out that its customer had ceased to trade in the UK and that there was little prospect of receiving settlement of the VAT charged, and that HMRC had been unjustly enriched. HMRC maintained its stance that the importer
should reclaim the VAT on its VAT return, and that this is the position as set out in both Public
Notice and Customs Information Papers. HMRC specified VAT is only repaid to freight forwarders and other agents where importers go into liquidation, or when an administrator or administrative receiver has been appointed who certifies that in its opinion, ordinary unsecured creditors will receive nothing in the liquidation. Upon detailed analysis of the legal aspect of the appeal, the FTT concluded that the agent had a legitimate argument in so much as that HMRC has been unjustly enriched and HMRC’s conduct could be considered an infringement of the principle of effectiveness.
The tribunal questioned the legal consistency of HMRC’s arguments pointing out two major errors committed by HMRC in this case, and in promulgating CIP (11) 14.
FTT conclusion
The FTT concluded that HMRC was wrong to say that the “normal VAT system”, that is the system of making periodic returns of output tax and input tax and paying the balance or receiving repayment, applies to the charge to VAT on imports from third countries’. The second major error made by HMRC was to confuse a repayment of VAT paid in error with a credit for input tax. HMRC decided not to defend the appeal and the FTT decided that HMRC must repay the overpaid import VAT to the appellant. Many freight forwarders may be familiar with the above presented line of processing by HMRC. Yet the FTT’s decision shows that they may have a case for repayment of overpaid VAT where the normal VAT system would not find application, and they may want to re-examine their position.
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