At the Committee’s meeting on 30 January 2019 it scrutinised a number of instruments. It was agreed that the special attention of the House of Commons should be drawn to one of those considered in accordance with Standing Orders. The Instrument and the grounds for reporting it are given below. The relevant Departmental memorandum is published as an appendix to this report.
1.1The Committee draws the special attention of the House of Commons to these Regulations on the grounds that they are defectively drafted in two respects, make unusual or unexpected provision in one respect, and require elucidation in two respects.
1.2These Regulations make provision about VAT under the Taxation (Cross-border Trade) Act 2018 in preparation for the United Kingdom’s withdrawal from the European Union. They create a regime in which overseas suppliers, rather than UK recipients, are liable for payment of import VAT in relation to goods shipped in a postal packet.
1.3Regulation 6 provides for exceptions to the general proposition that the supplier is liable to pay import VAT on those goods. The Committee asked Her Majesty’s Revenue and Customs to confirm whether the phrase “any import VAT payable by the supplier that is due on the qualifying importation” in regulation 6(2) is intended to have a different meaning from the phrase “any import VAT payable by the supplier on the qualifying importation” in regulation 6(3). In its memorandum, the Department confirms that the phrases have the same intended meaning and undertakes to amend regulation 6(2) at the next available opportunity. The Committee accordingly reports regulation 6 for defective drafting, acknowledged by the Department.
1.4Regulation 9 sets out obligations on suppliers and on HMRC Commissioners regarding the supplier’s registration under these Regulations. The Committee asked the Department to explain why registration is to be given effect from and the Commissioners notified on—rather than by—the date of the first qualifying importation. In its memorandum, the Department explains that this is done to avoid implying a subsisting obligation prior to that date, which is not the policy intention. The Committee accordingly reports regulation 9 as requiring elucidation, provided by the Department.
1.5The Committee also asked the Department to explain how, where the supplier has not notified them under regulation 9(1) of a requirement to be registered, the Commissioners will comply with their obligations under regulation 9(2). In relation to their obligation under regulation 9(2)(a), the Department explains that whether the Commissioners become aware of the liability as a result of the supplier’s notification or in some other way, the registration will take effect from the date the supplier was required to be registered under regulation 8(1), which is the date on which the first qualifying importation is dispatched by the supplier. The Department notes that this wording is similar to that used in paragraph 6 of Schedule 1 to the Value Added Tax Act 1994. Whilst this is true of regulation 9(2), it is not true of regulation 8(1) in so far as it provides for the date on which liability arises. In the 1994 Act, this date is expressed by reference to “the end of any month,” “at any time, if … there are reasonable grounds for believing that …,” or the time of the transfer of a business. These are all dates it is possible for HMRC to ascertain without receiving information directly from the supplier, in contrast to the specific date on which the supplier has dispatched the goods that trigger the liability to VAT under these Regulations. It is difficult to see how the Commissioners will be able consistently to comply with the obligation in regulation 9(2)(a) in circumstances where they have not been notified by the supplier under regulation 9(1). The Committee accordingly reports regulation 9(2) for defective drafting.
1.6Regulation 14 provides that any supplier who fails to register pursuant to regulation 8 is liable to a penalty. The Committee asked the Department to confirm whether suppliers will be subject to a penalty under regulation 14 where failure to register is due to an act or omission by the Commissioners. In its memorandum, the Department confirms that such cases would have to be dealt with by appealing under regulation 15, and that it considers a court would be likely to find a failure to register that is solely attributable to an act or omission by the Commissioners to be a reasonable excuse in such an appeal. The Committee believes that Parliament when conferring powers does not expect them to be used so as to impose penalties on people for matters beyond their control and due to the fault of the person imposing the penalty. Accordingly, the Committee reports regulation 14 as making unusual or unexpected provision.
1.7Regulation 25 provides for the time periods within which the Commissioners may assess the amount of import VAT due. Paragraph (3) provides that an assessment for any period may not be made after the end of two years after the end of the period, or (if later) one year after evidence of facts that justify the making of an assessment for that period comes to the Commissioners’ knowledge. Paragraph (6) provides that an assessment may not be made more than four years after the end of the period to which it relates. The Committee asked the Department to explain how paragraph (6) is intended to apply to an assessment to which paragraph (3)(a) or (b) applies. In its memorandum, the Department explains that paragraph (6) applies an overall time limit of four years following the end of the period, so that any assessment made under paragraph (3) is subject to that outside time limit. The Committee accordingly reports regulation 25 as requiring elucidation, provided by the Department.
1.8The Department’s memorandum also helpfully confirms the meaning of “duty of excise” in regulation 3(1).
Published: 1 February 2019