1.In its letter to Her Majesty’s Revenue and Customs of 16 January 2019 the Select Committee requested a memorandum on the following points:
1. Explain whether the expression “duty of excise” in regulation 3(e) is intended to have a different meaning from the expression “excise duty” as defined by s.53 TCTA 2018.
2. 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).
3. In relation to regulation 9, explain:
a) why registration is to be given effect from and the Commissioners notified on—rather than by—the date of the first qualifying importation; and
b) where the supplier has not notified the Commissioners under paragraph (1):
i. how they will determine that the supplier is required to be registered; and
ii. how they will comply with the obligation in paragraph 2(a) if the requirement to register arises on the date the first qualifying importation is dispatched by the supplier.
4. 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.
2.This memorandum has been prepared by Her Majesty’s Revenue and Customs (“the Department”).
3.The phrase ‘any duty of excise’ has a different meaning to ‘excise duty’ as defined in section 53 TCTA 2018. ‘Any duty of excise’ is used widely in legislation about customs and excise and related matters. It is taken to encompass all duties of excise chargeable by statute and is not specifically defined in the legislation. Its use in regulation 3(e) secures the policy aim that parcels containing goods subject to an excise duty will be excluded from the regime established by the regulations.
4.The Department confirms the phrase “any import VAT payable by the supplier that is due on the qualifying importation” in regulation 6(2) is not intended to have a different meaning from the phrase “any import VAT payable by the supplier on the qualifying importation” in regulation 6(3). The Department considers that the insertion of the words ‘that is due’ into the phrase in regulation 6(2) could not lead to that being interpreted as meaning something different to the phrase in regulation 6(3). The Department will nevertheless make an amendment to omit that phrase from regulation 6(2) at the next available opportunity.
5.In relation to the question asked about regulation 9 in paragraph 3(a) of the Committee’s letter the Department explains the use of the word ‘on’ rather than ‘by’ as follows. Regulation 8 requires a supplier to be registered with effect from the date on which the first qualifying importation is dispatched by the supplier. Regulation 10 permits a supplier who intends to make a qualifying importation to register in advance of dispatching the importation and the supplier will be registered with effect from the date of the application or an earlier agreed date. The obligation in regulation 9 to apply for registration only applies to someone who is not already registered under the permissive provision in regulation 10. The only day on which such an obligation arises is the day of first dispatch not before it and so the Department considers the use of ‘on’ as logical and accurate as ‘by’ implies there is a subsisting obligation before that date which is not the intention of the legislation. The legislation permits registration before that date but does not require it.
6.In relation to the question asked by the Committee in paragraph 3(b)(i) the Department’s response is that registration schemes, including the standard VAT registration regime, generally place the onus on the person liable to register to notify that liability and that is the way in which most registrations occur. The Commissioners use various strategies to police non-compliance and the same will be true of the parcels registration scheme as for other VAT registration machinery.
7.In relation to the questions asked about regulation 9 in paragraph 3(b)(ii), regulation 9(2) provides that where the Commissioners are satisfied that a supplier is required to be registered, the Commissioners must register the supplier with effect from the date on which the requirement to register arises. That does not require the Commissioners to process a registration and make an entry on the register on the day liability arises. The entry of that registration will only occur when the Commissioners become aware of the liability. That might be immediately where the supplier notifies the Commissioners under regulation 9(1) (a compliant supplier who chooses not to register until the day of dispatch can do on that day via an online system) or it may be a later date where the Commissioners discover that a supplier was required to be registered. In both cases, the registration will take effect from (and will be recorded as) the date the supplier was required to be registered under regulation 8(1) and VAT import liability will arise from that date. The wording used in this regulation is similar (for example) to paragraph 6 of Schedule 1 to the Value Added Tax Act 1994 which deals with the VAT registration of UK established taxpayer.
8.In relation to the Committee’s question at paragraph 4 the Department confirms that, as a general proposition, a supplier whose failure to register is solely attributable to an act or omission by the Commissioners will not be subject to a penalty. Regulation 15 provides that a liability to a penalty for failure to register does not arise if that supplier satisfies the Commissioners or the tribunal on appeal that there is reasonable excuse for the failure. The concept of reasonable excuse in the context of VAT penalties is well developed and been subject of regular litigation over a number of years in the tax tribunal. Each case must be judged on its own facts but the Department anticipates that a failure to register that is solely attributable to an act or omission by the Commissioners would be accepted by them to be a reasonable excuse under regulation 15.
9.Finally the Committee asks, in relation to regulation 25, how paragraph (6) is intended to apply to an assessment to which paragraph (3)(a) or (b) applies. Paragraph (6) applies an overall time limit of four years following the end of the period for the Commissioners to raise an assessment. That overall time limit interacts with paragraph (3) as follows. First, you look to paragraph (3)(a). If you are proposing to assess for a taxable period which ended more than 2 years ago, paragraph (3)(a) prevents this. However, paragraph 3(b) allows the Commissioners to raise an assessment one year after evidence of facts comes to their knowledge that are sufficient in their opinion to justify the making of an assessment. Even if you fall within paragraph (3)(b) if the taxable period you are concerned with ended more than 4 years before the date on which you propose to assess, paragraph (6) will prohibit the assessment. The provisions in regulation 25 have been modelled on section 77C of the Value Added Tax Act 1994. The way in which these time limits operate is also to be found in the general assessment provisions of that Act at sections 73(6) and 77(1)(a).
Her Majesty’s Revenue and Customs
22 January 2019
1 For example the phrase “any duty of excise” is used eight times in the Customs and Excise Management Act 1979 without further definition and also in section 12 of the Finance Act 1993, sections 9, 12 and 13A of the Finance Act 1994 and in section 17 of that Act as an element of the definition of “relevant duty” and more recently in the same way in section 102 Finance Act 2014.
2 See for example sections 57 to 71 of the Value Added Tax Act 1994 and also the Tribunal decision in Kwik Move UK Limited v HMRC (2008) WL 4789953 which concluded that the failure of HRMC systems to cope with the taxpayer’s numerous filings on a particular date was a reasonable excuse for a failure to file a VAT return.
Published: 1 February 2019