Sales Tax Articles
Sales Tax State Activity Update - September 2007
UK VAT Tribunal Considers Meaning of Taxable Person
This is an appeal of an earlier HMRC decision that involves the purchase of computer chips by a Spanish customer from a UK supplier. The UK supplier zero rated the supply on the basis that the customer was registered in Spain. However, HMRC ruled that the purchaser was not a taxable person in another Member State of the European Union and the supplier did not exercise proper due diligence in determining if the purchaser was a taxable person.
In Spain, traders who wish to carry out intra-Community business must apply to be included on a register called ‘Registro de Operadores Intercommunitaries' (ROI). Being on the register allows the trader to add the prefix ES to their registration number which designates them as being registered to carry out intra-Community transactions. A business must be on the register before they can be added to on the VAT Information Exchange System or VIES which is used to verify registration numbers.
Prior to the time of the purchases from the UK supplier, the Spanish authorities had removed the purchaser from the ROI because they were unable to trace them to any trading address in Spain and they were not carrying out any business activities in Spain. The purchaser's registration number had not yet been cancelled.
HMRC concluded that the purchaser was not a taxable person even though they still had a registration number at the time of the supplies. Therefore, the supplier was not entitled to zero rate the supplies and HMRC assessed output VAT on the supplies made to the purchaser.
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