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Can you claim back notional input tax not actually charged?

Throwing a letter in a red British post box from the side

3 minute read.

In September 2009, the appellant made a claim for input tax it claimed it had incurred on postage totalling £383,599, which HMRC rejected in 2010.
The appellant carried on a mail order business and used the services of Royal Mail to despatch its orders and also to distribute advertisements.

It was accepted that at the time the Royal Mail made those supplies to they were considered to be exempt from VAT.

The appellant’s claim was made on the basis that Royal Mail had wrongly treated its supplies as exempt when the services were in law standard rated following the ECJ’s decision in TNT as they were ‘individually negotiated”.
HMRC agreed that the Royal Mail’s ‘Mailmedia’ supplies were standard rated as a matter of EU law. It was agreed by the parties that Royal Mail had treated the supplies of ‘Mailmedia’ as exempt.

It did not account for VAT on the supplies and it did not issue VAT invoices in respect of them.

The appellant’s position was that Royal Mail’s supplies of Mailmedia were standard rated as a matter of UK law and that it was therefore entitled to recover input tax on the output tax which Royal Mail should have accounted for.

HMRC’s case was that the appellant had not really borne the burden of VAT at all. The supplies of Mailmedia services were treated as exempt so no VAT was added to the price.

The Tribunal considered that under Art 168 VAT is required to be due or paid. It is not enough to owe or pay an amount stated to be VAT if it is not really VAT. The Tribunal therefore found in favour of HMRC and dismissed the appeal. 

Zipvit Ltd v Revenue & Customs [2014] UKFTT 649 (TC)

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