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Talking Points 39/20 and 40/20: KPMG’s weekly indirect tax news update

Talking Points 39/20 and 40/20: KPMG’s weekly indirect

Read Talking Points to keep up to date on recent Indirect Tax developments

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Talking Points is a weekly newsletter covering recent developments in Indirect Tax.  We will highlight the most significant items in Tax Matters Digest so readers are aware of issues that may be relevant and can read on for more details where applicable. Issue 39/20 included: the extension of the specified supplies order to include relevant financial supplies to EU customers; a judgment concerning input VAT recovery on costs of an aborted acquisition; and conclusion of the consultation on Plastic Packaging Tax. Issue 40/20 included: a judgment on the cost sharing exemption; an Upper Tribunal decision on the liability of the taxpayer’s juice cleanse programmes; HMRC’s VAT appeal updates and cases which HMRC have lost and are not appealing; and the latest end of Brexit transition guidance and legislation.

18 November 2020 | Issue 39/20
This week’s edition begins with the announcement that relevant financial supplies to EU counterparties will give the right to VAT recovery after end of transition. In Sonaecom SGPS (C-42/19), the Court of Justice of the European Union (CJEU) has concluded that the VAT on the consultancy services was deductible, as it would have been used to make taxable supplies to the acquired company had the acquisition proceeded as planned. However, the VAT on the commission paid to raise the capital that would have been used to fund the acquisition was irrecoverable on the basis it was actually linked to the loan of that capital by the taxpayer (change of use to make exempt supply). Finally, following the conclusion of the “Plastic Packaging Tax: policy design” consultation, the Government has published the policy paper and draft legislation setting out the key features of the new tax.

25 November 2020 | Issue 40/20
This week’s edition begins with the Kaplan International College (C-77/19) judgment in which the CJEU concluded that cost sharing exemption cannot apply to the supply to the VAT group, as not all VAT group members were in the cost sharing group (CSG) and in particular, the representative member of the VAT group was not in the CSG. This decision creates yet another limitation to the cost sharing exemption though the CSG territoriality question was not answered by the CJEU. 

Next, in The Core (Swindon) Ltd, the Upper Tribunal dismissed HMRC’s appeal and upheld the First-tier Tribunal’s (FTT) decision that juice cleanse programmes are not beverages and therefore should be treated as zero rated food. HMRC’s VAT appeal updates has been updated confirming that HMRC are not appealing against the following FTT decisions, therefore bringing an end to these strands of litigation: Landlinx Estates Ltd where the FTT decided that the surrender of an option to acquire land is an exempt supply of an interest in land; The Ice Rink Company Ltd & Anr where the FTT concluded that hire of children’s ice skates supplied as part of a skating package was a separate zero rate supply; and Wickford Development Co Ltd where the FTT ruled that manual roller blinds are building materials for the purpose of VATA Schedule 8 Group 5 Item 4. In a round-up of other news, there is the latest end of transition guidance on moving goods out and into the UK from January 2021, and the latest instrument to be made under the Taxation (Cross-border Trade) Act 2018 (TCTA) following the UK’s departure from the EU. The TCTA in effect preserves the relief for handling of qualifying aircraft and provides for a similar relief for the handling of international trains. It also removes the VAT exemption from supplies of pension fund management services provided to funds established in the EU, and revokes certain planned changes to the scope of the zero-rate to certain designated travel services, which will be replaced by other changes that ensure the margin on any designated travel services enjoyed outside the UK will be zero rated.

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