EU VAT: No supply, no onward supply relief

In Scanwell Logistics (UK) Limited v HMRC [2021] TC8207, the First Tier Tribunal (FTT) agreed that Onward Supply Relief was not available to a company acting as an import agent. They had not made a supply of goods.

Prior to 31 December 2020 under Onward Supply Relief (OSR), no import VAT was payable on the import of goods if:

• The importer used the goods in making a supply of goods.
• The supply was to a taxable person in the EU.
• The importer had complied with the reporting and administrative conditions imposed by regulations and HMRC.

Scanwell Logistics (UK) Limited (Scanwell) was appointed as an ‘import agent’ for the import into the UK of a number of consignments of goods from China.

• When the goods were released to them, they arranged their onward transport to other countries in the EU.
• Scanwell made import declarations claiming exemption from import VAT under OSR.
• HMRC determined that OSR was not available and assessed Scanwell to £5.7m of VAT.
• Scanwell made an Appeal on the grounds that it was entitled to OSR.

The FTT dismissed the appeal. OSR was not available to Scanwell.

• Whilst the contracts intended that OSR should be available, Scanwell had never acquired legal title to the goods, so for the purposes of OSR:
  • It could not act as an agent for the end customers.
  • It could not act, as an agent, in its own name in relation to the supply of goods.
• As a result, Scanwell had not made either a supply or a deemed supply of the goods as was required for OSR to apply.

Part of Scanwell’s appeal concerned double taxation if OSR was not available. The FTT found that:

• Scanwell could have used the external community transit procedure to ensure that no duty or taxes had to be paid until the goods arrived with the end customer. It had not done so due to the requirement for a guarantee.
• Since double taxation could have been avoided there was no need to construe the UK legislation differently so as to prevent it.

Since Brexit OSR only applies to goods being imported via Northern Ireland then onto the EU.

Useful guides on this topic

Agents and principals
Where someone is acting as agent for a principal, it is possible that the income received by the agent on behalf of the principal is outside the scope of VAT for the agent. What is an agent for VAT purposes? When do these rules apply?

Importing goods into GB from 1 January 2021
The post Brexit transition period ends on 31 December 2020. HMRC has issued guidance for importing goods. 

Exporting goods from GB from January 2021
The post Brexit transition period ended on 31 December 2020. What do the new rules mean? Have all of the relevant applications been made in order to continue trading smoothly?

International goods
Special VAT rules apply to goods bought from and sold to non-UK businesses.

How to appeal an HMRC decision
Disagree with an HMRC decision? How to appeal, what type of decision can you appeal and what are your different options when you disagree with HMRC? What are the key steps in making an appeal?

External link

Scanwell Logistics (UK) Limited v HMRC [2021] TC8207