First-tier Tribunal (Tax)

[2009] UKFTT 373 (TC)

TC00311

CATCH WORDS – export of goods - outside Member States – acquisition by taxable person or person not resident in UK – zero rating of supply - appeal dismissed

FIRST-TIER TRIBUNAL (TAX CHAMBER)

                                                          GHULAM HASSAN                                         Appellant

- and -

THE COMMISSIONERS FOR

                                      HER MAJESTY’S REVENUE AND CUSTOMS         Respondents

Tribunal:        Jennifer Trigger (Judge)

                        Beverley Tanner (Member)

Sitting in public in Manchester on 22 October 2009

Mr. Rayner for the Appellant

Mr. Chapman, counsel, instructed by the General Counsel and Solicitor to Her Majesty’s Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2009

DECISION

1.           In this case the tribunal was required to decide whether the supply of 2 JCB’s (“the Goods”), which were intended for export to a place outside the member states, had been supplied to the Appellant or had been supplied to a person not resident in the United Kingdom, namely a trader who had no business establishment in the United Kingdom from which taxable supplies were made or to an overseas authority and further whether the goods should be zero-rated for VAT purposes and the Appellant allowed credit for the VAT paid.

2.           The evidence upon which the tribunal was required to make its decision consisted of a bundle of copy documents submitted by both parties and the oral evidence of both the Appellant and of Mr. Ian Tustin of the HMRC Appeals and Reconsiderations Team in Cardiff.  On the basis of that evidence the tribunal found the following facts to have been established.

3.           The Appellant of 28 Brook Field Road, Crumpsall, Manchester M8 5SE is unregistered for the purposes of VAT.

4.           On 29 May 2008 the Appellant purchased 2 JCB Loaders from Loughlin Plant (“the Supplier”) of Wester Lumloch Farm, Auchinairn Road, Bishopbriggs, Glasgow G64 1UR.  The loaders were marked with registration numbers SF51VUP and SF51VUR.  An invoice was issued in the name and address of the Appellant.  The total sum of the supply of the Loaders was shown as £48,468.75 including VAT in the sum of £7,218.75.

5.           A Sea Waybill dated 29 May 2008 records that the two loaders, referred to by their respective registration marks, were shipped from Southampton to Jebel Ali in Dubai.  The shipper is recorded as the Appellant and the consignee, being the receiver of the goods, is recorded as London Heavy Equipment Establishment (“LHEE”) PO Box 70806, Abu Dhabi, United Arab Emirates.

6.           On a subsequent date the Appellant approached the Supplier, seeking to retrospectively zero-rate the supply of the Goods on the basis that the Appellant had bought the Goods for his brother-in-law whose business was based in Abu Dhabi.  By letter dated 20 October 2008 (document 25) the Supplier sought clarification of the correct liability of the supply with HMRC.  By letter 5 November 2008 (documents 27 and 28) the HMRC wrote to the Supplier tendering advice only that “in this particular instance it appears the goods were sold to a customer in the UK so this is seen is a UK to UK supply and will be standard-rated for VAT purposes.  As the ownership of the goods transferred to your customer and they have taken on the responsibility of exporting the goods you should not be required to refund them any VAT or issue a credit note.”

7.           Through a series of correspondence between the Appellant and the HMRC, the Appellant sought advice as to how to retrospectively zero-rate the supply of the Goods.  By letter dated 18 November 2008 (documents 9 and 10) the HMRC wrote to the Appellant’s representative advising that as the documentation showed:

·   the supply was made to the Appellant

·   who was resident in the United Kingdom; and

·   the Goods were delivered to an address in the United Kingdom,

the correct liability had been charged by the supplier.

That the purchase monies for the goods were supplied by Altaf Hussein and that Altaf Hussein had requested the Appellant to purchase the Goods (document 21) and that the purchase  monies were sent and paid as detailed in the Funds Transfer Applications (documents 32, 34 and 34a) and paid to the Supplier as detailed in documents 34b and 37.

8.           The Goods were transported to C.G. Hitchens, Highfield Farm, Birds Edge Lane, Birds Edge, Huddersfield HD8 8XR (“the Premises”) (document 34c) and put into a container at the Premises ready for export from the United Kingdom (document 34d).

9.           That the Supplier knew that the Goods were to be exported to the United Arab Emirates, and to whom in the United Arab Emirates the Goods were to be sent.  At all times the Supplier considered that the Appellant was their customer and the Goods were supplied to the Appellant on that basis.

10.        The legislation which the tribunal was asked to consider was Section 30(8) of the Value Added Tax Act 1994 (“the Act”):

         “30. Zero-rating

(8) Regulations may provide for the zero-rating of supplies of goods, or such goods as may be specified in the regulations, in cases where –

               (a) The Commissioners are satisfied that the goods have been or are to be exported to a place outside the Member States or that the supply in question involves both –

                           (1) the removal of the goods from the United Kingdom; and

(2) their acquisition in another member state by a person who is liable for VAT on the acquisition in accordance with the provisions of the law of that member state corresponding, in relation to that member state, to the provisions of Section 10; and

(b) Such other conditions, if any, as may be specified in the regulations or the Commissioners may impose are fulfilled.”

Regulation 129 of the Value Added Tax Regulations 1995 (“the Regulations”):

         “129. Supplies to overseas persons

(1)  Where the Commissioners are satisfied that –

(a) goods intended for export to a place outside the Member States have been supplied, otherwise than to a taxable person, to -

            (i) a person not resident in the United Kingdom,

(ii) a trader who has no business establishment in the United Kingdom from which taxable supplies are made, or

(iii) an overseas authority, and

(b) the goods were exported to a place outside the member states,

the supply, subject to such conditions as they may impose, shall be zero-rated.”

11.        Mr. Rayner first submitted that the conditions for zero-rating goods for export after processing or incorporation referred to at paragraph 3.6 of Public Notice 703 (document 56) did not apply to the appeal.  Mr. Rayner further submitted that it was agreed between the parties that the Goods had been exported within the relevant time limits and that the Goods had not been used.   The issue before the tribunal was whether the Goods had been supplied to an overseas customer.

12.        Mr. Rayner contended that all the evidence before the tribunal pointed to the fact that there had been a supply to an overseas customer for whom the Appellant was acting as an intermediary.  Mr. Rayner submitted that an indirect export occurred where an overseas customer or their agent collects or arranges for the collection of goods from a supplier within the UK and then takes the goods outside the EC, as defined in paragraph 2.11 of Public Notice 703 (document 51).  Mr. Rayner submitted that the relevant questions for consideration by the tribunal were who paid for the Goods; when was the money paid to the Appellant; who authorised the Appellant to buy the Goods; to whom did title pass when the purchase monies, sent from the United Arab Emirates, was handed to the Supplier and could the Appellant legally dispose of the Goods.  It was Mr. Rayner’s submission that throughout the transactions the Appellant was acting as agent for Altaf Hussain, who was not a person resident in the United Kingdom.

13.        Mr. Rayner further submitted that the Goods had been exported to a place outside the member states in accordance with the regulations and that the export of the Goods had been subject to conditions imposed by HMRC as detailed in their undated email correspondence to Mr. Rayner (documents 23 and 24).

14.        Mr. Chapman, counsel, for HMRC opened his submissions with the question, “were the Suppliers making a supply to a UK customer or an overseas customer”.  He submitted that paragraphs 2.11 and 2.14 of Public Notice 703 (documents 51 and 52) do not carry the force of law.  He submitted that the Supplier must hold sufficient evidence to prove that a transaction of export has taken place and in this respect submitted that 6.4 of Public Notice 703 (document 68) was relevant to determine who was the customer as well as evidence that an export had taken place.

15.        Mr. Chapman submitted that what was important was who the Supplier thought was their customer.  The question of title to the Goods, Mr. Chapman submitted, was not relevant.  The Supplier had no evidence in the form of a name or address of any customer other than the Appellant.  Mr. Chapman further submitted by reference to document 25 that the Supplier was aware that the Appellant was buying machines for his brother-in-law in the United Arab Emirates but it did not appear that the Supplier was aware of the brother-in-law’s name.  As no-one from the Supplier was present to give evidence, the extent of the knowledge of the Supplier could not be tested and was limited to the documentary evidence before the tribunal.  At document 31, Mr. Chapman submitted, Altaf Hussein declared that he had asked the Appellant to purchase the Goods.  Altaf Hussein records at document 31 that he is managing partner of Nazin Maint. & Gen Cont. Co. LLC, Abu Dhabi.  This document, Mr. Chapman submitted, raised doubt as to whether the instructions given by Altaf Hussein were as a managing partner, as a sole trader, or in his personal capacity.  Furthermore the Non-Negotiable Fee Waybill (document 12) records the consignee as LHEE.  On that document, Mr. Chapman submitted, in box 1 the Appellant is recorded as Shipper (Principal or Seller licensee and full address) Mr. Chapman contended that if the Goods had been purchased on behalf of Altaf Hussein his name and address should have been included in box 1 and not those of the Appellant.  Mr. Chapman submitted it was not possible with any clarity to ascertain who was the overseas customer.

16.        Mr. Chapman submitted that the Appellant had confirmed that the Supplier regarded him as the customer and that it was the HMRC’s case that the Supplier could have amended the invoice if they were satisfied that they had sufficient information to correctly record a customer other than the Appellant.  Furthermore, document 25 – a letter dated 20 October 2008 from the Supplier – did not in Mr. Chapman’s submission establish an agency relationship.  It was Mr. Chapman’s submission that on the evidence before them the Supplier had identified the Appellant as their customer and they had insufficient information to form any view that any other person was their customer.  In those circumstances, Mr. Chapman submitted, the Supplier had supplied the Goods to the Appellant and not to an overseas customer.

Conclusion

17.        The tribunal made the following findings of fact:

·       The Supplier knew the Goods would be exported but did not know to whom and at all times the Supplier considered that the Appellant was their customer and supplied the Goods to the Appellant on that basis.

18.        The tribunal was satisfied on the balance of probabilities that at no stage during the transactions between the Supplier and the Appellant was the Supplier ever given sufficient information for them to identify a customer for the Goods other than the Appellant.  The tribunal was satisfied that the Appellant had failed to discharge the burden upon him to show that he was acting for an overseas customer.  The documentary evidence before the tribunal did not identify an overseas customer.  It was unclear as to whether the request by Altaf Hussein to the Appellant was made in his personal capacity or as managing partner of Nazin Maint. & Gen Cont. Co. LLC.  Whilst the tribunal noted that the non-negotiable fee waybill recorded the consignee as LHEE there was no evidence before the tribunal which linked LHEE to Altaf Hussein or the company of which he managing partner.  It was unclear to the tribunal to whom in the United Arab Emirates the Goods were to be supplied.  In the circumstances the Appellant had failed to show that there had been an indirect export in accordance with the Act or that he had satisfied the requirements of the Regulations.  In the circumstances the tribunal dismissed the appeal.

MAN/2008/1476

JENNIFER TRIGGER

JUDGE
Release Date: 17 December 2009