In TSI Instruments Ltd v HMRC [2025] TC09676, the First Tier Tribunal (FTT) found that import VAT charged on goods entering the UK could not be recovered as the goods were not owned by the importer.
TSI Instruments Ltd (TSI), a UK trading subsidiary of TSI Inc., a US company, repaired and calibrated scientific instruments. The group, along with a further subsidiary based in Germany, manufactured scientific equipment predominantly used for air and environmental measurements.
- TSI mainly repaired and calibrated instruments that had been bought by customers around the world. TSI never took ownership of the goods it worked on, at any point.
- Over a four-year period, where goods that required the services of TSI were owned by customers outside of the UK, TSI:
- Imported the goods to the UK.
- Paid Import VAT on the goods on entering the UK.
- Reclaimed the import VAT as input tax on their VAT returns.
- HMRC argued that TSI was not entitled to claim the input tax, as the company did not own the goods. VAT assessments amounting to just under £8.5 million were issued.
- TSI appealed to the First Tier Tribunal (FTT).
The FTT considered the principles established by CJEU case law, which allow import VAT to be deducted in two cases:
- Where the importer is the owner of the goods or has the goods at their disposal.
- Where the cost of the goods is reflected in the price of the relevant transactions.
The FTT found that:
- It was difficult to conceive a situation where the cost or value of the goods would be reflected in output services, where the importer is not, and does not become, the owner of the goods.
- VAT recovery was dependent on a 'direct and immediate link' between the taxable supplies and the input VAT.
- Although TSI paid the import tax and included the cost in its repair charges, the value of the goods was not reflected in any output services; therefore, no direct link could be established.
- After considering both EU and domestic law, import VAT could not be recovered.
The appeal was dismissed.
Useful guides on this topic
How to claim back import VAT and duties
Buying goods from Europe? Now that the UK has left the EU you may well now be liable for VAT and customs duties. If your imports are returned or import taxes have been applied in error you can claim a refund.
International goods
Special VAT rules apply to goods bought from and sold to non-UK businesses.
Place of supply: Goods
The place of supply (POS) of goods determines whether the supply is within the scope of UK VAT and whether VAT is payable on that supply.
Importing goods into GB from 1 January 2021
The post-Brexit transition period ended on 31 December 2020. HMRC issued guidance for importing goods.
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