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Tribunal VAT zero rating

6th July 2012

Tribunal VAT zero rating

The Upper Tribunal recently heard a taxpayer's appeal against a decision of the First-tier Tribunal concerning the conditions for zero-rating the supply of goods to a company in Spain. The initial decision of the First-tier Tribunal dismissed an appeal by a wholesaler based in Northern Ireland relating to the supply of some 47 consignments between June 2005 and September 2006. All the consignments in question related to the sale of various goods such as washing powder, soft drinks and confectionary to a Spanish company.

The taxpayer treated the supplies as zero-rated for the purposes of VAT on the basis that the goods were to be removed from the UK by the purchaser. The First-tier Tribunal dismissed the initial appeal on the basis that the Spanish purchaser had never accounted for VAT in Spain and that the transport documentation provided by the Spanish company were forgeries. The First-tier Tribunal decided that on the basis of probabilities it was likely that the Spanish customer was involved in tax avoidance and that the consignments in question had never reached Spain. Whilst there was no evidence that the taxpayer was involved in any form of tax avoidance it was clear that thorough checks on his customer's credibility had not been carried out.

The Upper Tribunal found some errors in the First-tier Tribunal's decision. Namely, that some of the goods had left the UK for the Republic of Ireland. Ultimately, the Upper Tribunal rejected the taxpayer's appeal. The Tribunal agreed that the numerous shortcomings in the documents provided by the appellant left the Upper Tribunal with no option but to concur with the original Tribunal decision that the conditions for zero-rating had not been satisfied.