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United Kingdom VAT & Duties Tribunals Decisions
You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> Maine Distribution Ltd v Revenue & Customs [2007] UKVAT V20284 (06 August 2007)
URL: http://www.bailii.org/uk/cases/UKVAT/2007/V20284.html
Cite as: [2007] UKVAT V20284
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- On 7, 16 and 24 November 2005, the Appellant company, Maine Distribution Limited ("Maine"), supplied goods invoiced as GIGA CPUs (computer processing units or computer chips) to Indigo Light SL ("Indigo"), a company registered in Spain. Maine claimed to be entitled to zero-rate the transactions for VAT purposes. Her Majesty's Commissioners for Revenue and Customs ("the Commissioners") did not accept that it was so entitled because in their view:
- As a result, on 27 March 2006, the Commissioners denied zero-rating to Maine, having earlier allowed it conditionally, and on 10 April 2006 made an assessment to recover VAT of £326,010. It is against that assessment that Maine now appeals.
- Maine was represented by Tim Brown, and the Commissioners by James Puzey, both of counsel. They produced two bundles of copy documents, and Mr Puzey called two of the Commissioners' officers, Michael James Downer and Nicholas Greenough, to give oral evidence. From that evidence, the following facts emerged.
- On 13 September 2004, Maine registered for VAT under the name of Maine Doors & Fittings Limited, describing its business activities in Form VAT 1 as "Distribution of furniture components to the kitchen and bedroom industry", estimating its future annual turnover as £225,000, and indicating that it did not expect to make EC supplies or acquisitions.
- Early in October 2005, Maine informed the Commissioners that it proposed to diversify into wholesale trading in CPUs. On 12 October 2005, the Commissioners responded by letter through their Redhill specialist MTIC fraud office informing Maine of the potential risks in such trading and pointing out the need to carry out due diligence checks on all potential suppliers and customers. Following the letter, Mr Downer visited Maine on 18 October 2005. Whilst there, he interviewed Mr Zubair Patel, Maine's director, and was informed that it would shortly be commencing wholesale trading in CPUs, buying from UK suppliers and exporting to customers in the European Union. Mr Patel explained that funding for the operation would be provided by his associated company, Worldwide Appliances Limited, and a number of investors based in Dubai. Mr Downer repeated the Commissioners' earlier advice as to the necessity for due diligence checks. (Worldwide Appliances Limited, which also dealt in CPUs, had been visited by the Commissioners on 1 December 2003 and advised of the risks involved in trading in CPUs, as well as being provided with the Customs' notices and guidance on that trade).
- Early in October 2005 Maine enquired of the Commissioners whether Indigo's Spanish VAT registration was valid. On 18 October 2005 the Redhill office confirmed in writing it was so and by including in Indigo's VAT number the prefix ES in their reply, indicated that on that date it was registered to carry out intra-Community transactions. We find that that was the only due diligence check on Indigo carried out by Maine.
- All businesses in Spain are allocated a tax identification number for the purpose of accounting for all taxes, including VAT. By reason of Royal Decree 1041/2003, which took effect on 1 September 2003, traders who wish to carry out intra-Community transactions are additionally required to be included in the Registro de Operadores Intercommunitaries ("ROI") and the prefix ES is added to their tax identification number. The ROI is an integral part of the Spanish register of businessmen, professionals and retainers. According to Spanish law, an intra-Community acquisition by a Spanish company not on the ROI is not an exempt (zero-rated) transaction for the supplier. Where details given to the Spanish authorities by a business applying for a tax number are inaccurate, the business will be removed from the ROI.
- In November 2005 Maine entered into the three following deals in CPUs. In all three deals it purchased stock from Blade 1 Limited as follows:
- Subsequent checks by the Commissioners showed there to be a missing trader at the beginning of each chain of transactions i.e. a trader who should have accounted for VAT but who disappeared having failed to do so.
- Maine's VAT return for the month of 11/05 showed a net turnover of £2.1 million and a repayment due to it of £373,689.39. On receiving the return, the Commissioners decided to verify it, and, as part of that process, on 20 December 2005, Mr Downer visited Maine's accountants, Messrs Michael Brookes & Co. of Middleton, Manchester. He uplifted all the paperwork relevant to the return, and subsequently analysed it. As part of his analysis, Mr Downer checked Indigo on the European Community VAT Information Exchange System, known as the VIES, and found that it had been deregistered for intra-Community VAT purposes by the Spanish tax authorities on 19 October 2005. Also on 20 December 2005 the Commissioners wrote to Maine informing it of Indigo's removal from the VIES by the Spanish authorities and indicated that any transactions which it had entered into with Indigo after the date of deregistration would "fall to be verified".
- Mr Downer had four main concerns with Maine's business records, namely:
- On 27 March 2006, the Commissioners disallowed zero-rating of Maine's deals as not fully meeting the conditions contained in section 3 of the Customs Notice 725.
- The process of removal of Indigo from the ROI by the Spanish authorities, as subsequently ascertained by the Commissioners, took the following form. On 20 July 2005, Deputy Inspector José Ruiz Diaz of the Finance Office for Catalonia visited the registered office of Indigo, which he found to be the address of a lawyers' practice, Legal Link Abogados ("Legal Link"). Legal Link confirmed that their office was indeed the registered office of Indigo, but explained that it was merely an accommodation address, all correspondence addressed to it being forwarded to the London home of its only director, Mr Harish Mavji Manji, a UK resident. Further, Legal Link disclosed that they held no books of account or VAT records for Indigo, and did not carry on any kind of business "related" to it.
- On 16 September 2005 the Finance Officer for Catalonia issued an order for Indigo to be included in the plan for checking on compliance with "the formal tax and accounting requirements".
- The authorities being unable to trace any trading address for Indigo in Spain, on 10 October 2005, Inspector Lopez, Senor Diaz's superior officer, reported to the Head of Regional Tax Management for Catalonia that there was "no mention in the registration documents [submitted by Indigo], nor in the business activity declared for the purpose of tax on economic activities, of any other address at which such activity could be carried on". In consequence, Inspector Lopez concluded that Indigo did not meet the requirements for entry on the ROI and invited the authority to remove it therefrom. Indigo was so removed on 19 October 2005 as having been suspected of being involved in a fraud scheme.
- On 7 November 2005 the Official Gazette of the Government of Catalonia contained a notice addressed to Indigo that "inspection action was to start in respect of the tax period from the fourth quarter of 2004 to the second quarter of 2005". That notice required Indigo to respond to it if it wished to be restored to the ROI. It failed to do so.
- Following Indigo's deregistration from the ROI, on 16 January 2006, the Finance Office for Catalonia submitted a report to the Deputy Regional Inspector. As translated from the original Spanish, it stated:
- We note and find that the entries on the VIES were necessarily made on the basis of information provided by those claiming to trade with Indigo, Indigo itself having made no returns whatsoever to the Spanish authorities in 2005.
- Also amongst the papers before us is a letter from Legal Link dated 1 December 2005 and addressed "To whom it may concern". It reads as follows:
- We are not satisfied that the letter was written on 1 December 2005 or indeed was written for any purpose other than for production as evidence in the present appeal. We find that on 1 December 2005 Indigo had not complied with all the legal requirements to carry on its activity abroad, and never took any steps to reinstate its registration in the VIES system.
- On 22 March 2006, by letter Legal Link informed Maine that on 16 November 2005 Indigo "formally removed its registered address to a new office by public deed", and "on the same date, the company changed its tax address by communication to the relevant Spanish tax office". Nothing in the remaining documents before us indicates that the Spanish authorities were notified of any change in Indigo's registered address. Indeed, a Certificado de la Condicion de Sulet Pasivo issued by the Agencia Tributaria on 17 January 2006 contains the old address. We find that the tax authorities were not notified of any change of address by Indigo.
- To complete our findings of fact, we included the response to an enquiry from the Commissioners by the Oficina Nacional de Investigacion del Fraude-ONIF-ESPANA. Dated 17 May 2007 the response was in the following terms:
- The legislation we must apply to those findings of fact takes the following form. At the relevant time, Article 28cA(a) of the EC Sixth VAT Directive provided for Member States to exempt supplies of goods effected for another taxable person or non-taxable person acting as such in a Member State other than that from where the goods departed. And Article 4(1) of that Directive provided that " 'taxable person' shall mean any person who independently carries out in any place any economic activity specified in paragraph 2, whatever the purpose or results of that activity".
- Article 28cA(a) was implemented in UK domestic law in section 30(8) of the Value Added Tax Act 1994, regulation 134 of the VAT Regulations 1995 and section 3 of Customs Notice 725.
- Section 30(8) of the 1994 Act reads as follows:
- Regulation 134 of the VAT Regulations provides as follows:
- Section 3 of Notice 725 allows for zero-rating of supplies provided:
- Article 28a(1)(a) states that the following shall also be subject to value added tax:
- The Commissioners do not contend that the transactions were otherwise than as stated, that is they accept that the goods bought and sold were those Maine claimed to have bought and sold. They accept that the goods and the consideration therefor duly changed hands, and the goods were transported out of the United Kingdom. However, they do contend that Maine did not have the necessary evidence to support its claim to zero-rating.
- Mr Brown submitted that Maine did meet the requirements of section 3 of Notice 725: its customer's VAT number was valid, and, whilst Indigo was removed from the ROI, the Spanish authorities did not de-register it from the VAT register. As appeared from the letter from Legal Link of 1 December 2005, Indigo's VAT number was therefore valid because:
- Whichever of the above situations was the case, Mr Brown submitted that Indigo remained a taxable person under Article 4 of the Sixth Directive, which the Court of Justice of the European Communities had consistently held was to be interpreted widely, Van Tiem v Staatsecretaris van Financien (Case C-186/89) [1993] STC 91.
- Mr Puzey observed that Indigo was removed from the ROI on 19 October 2005; the Spanish authorities could find no evidence of any business activity at its business address; the office was merely an accommodation address used for the re-delivery of mail to its sole UK resident director, Mr Manji; and Indigo made no declarations of intra-Community acquisitions or supplies.
- He did not accept that the letter of 1 December 2005 represented an accurate statement of law or fact as regard intra-Community trading by Indigo. Mr Puzey maintained that the conclusion to be drawn from the Spanish authorities' investigation was that Indigo was a mere cipher or vehicle for fraud to be carried out. There was a tax loss in each of Maine's three transactions, as all commenced with a missing trader. Had Maine shown due diligence, the fact that Indigo was not a taxable person would have been obvious.
- Not only did the Spanish authorities remove Indigo from the ROI, depriving it of the status of a taxable person for the purposes of intra-Community transactions, but found it not to be carrying out any economic activity. Accordingly, Mr Puzey submitted, Indigo was not acting as a taxable person within the meaning of Article 4 of the Sixth Directive at the time of the Spanish investigation. He maintained that if the Spanish authorities were able to discover that from fairly straightforward enquiries at Indigo's registered address, it bore upon the question of whether Maine's checks on Indigo were adequate and showed due diligence.
- If the document sent with Legal Link's letter of 22 March 2006 purporting to show that Indigo changed the address of its registered office on 16 November 2005 were an attempt to show that the Spanish authorities visited the wrong address, Mr Puzey maintained that it was unsuccessful: at the date of their enquiries, the address had not changed. Further Indigo continued to show its "old" address on documents dated later than 16 November 2005 (e.g. a letter to Maine of 24 November 2005).
- We find that Indigo was not on the ROI register in November 2005 when the transactions with Maine were said to be carried out: it had been removed therefrom on 19 October 2005. We accept that Indigo remained registered for VAT for domestic Spanish purposes, but also find that it was not carrying out any economic activity. As Mr Puzey observed, it was thus not a taxable person "acting as such" within Article 28cA(a) of the Sixth Directive. Had Maine carried out proper due diligence checks, that would have been obvious to it. It follows that we reject the above submissions of Mr Brown, and accept those of Mr Puzey in their entirety.
- In the alternative, Mr Brown submitted that if Indigo's VAT number were not valid for the purpose of Notice 725, it was nevertheless a "taxable person" under Article 4 of the Sixth Directive so that Maine could zero-rate its supplies under Article 28cA(a). The latter Article conferred directly on Maine effective rights to zero-rate its supplies. Notice 725 only applied to supplies made to VAT registered customers. He therefore contended that the status of "taxable person" had to be assessed solely on the basis of the criteria contained in Article 4, which did not include whether a person was registered for VAT (see the opinion of the Advocate-General Van Gervenag in Van Tiem at paragraph 15).
- The argument that a trader such as Indigo remained a taxable person within the meaning of Article 4 of the Sixth Directive was advanced, and failed, before the tribunal in JP Commodities Ltd v The Commissioners of Revenue and Customs (2006) Decision No. 19904. There the question was whether a UK supplier was entitled under Article 28cA to zero-rate supplies to a Gibraltar-based company, where the goods supplied were delivered to Belgium. The Gibraltar based company was not registered for VAT in the European Union, but by virtue of acquiring the goods in Belgium was obliged to register there. The tribunal found "taxable person" in the context of Article 28c to mean a person registered for VAT (see Red Giant Promotions v Commissioners of Customs and Excise (1998) Decision No. 15677) so that the UK supplier was not entitled to zero-rate its supplies. If that were incorrect, Mr Puzey maintained, the purpose of Article 28c was frustrated because the intention was that, for intra-Community acquisitions, tax was accounted for in the State of acquisition: that could not happen, or was impeded, if the acquirer was not registered for tax (see paragraph 21 of the decision in JP Commodities). Thus, he submitted, the condition that the customer's VAT number be shown on the vendor's invoice was consistent with the opening words of Article 28c that Member States were entitled to adopt measures aimed at the prevention of evasion, avoidance or abuse.
- Mr Brown accepted that his argument had been rejected by the tribunal in JP Commodities but contended that its decision was wrong. JP Commodities has appealed the tribunal decision to the High Court, and the appeal is listed for hearing between 17 and 19 October next. In those circumstances, we propose to defer our decision on Maine's alternative case until the promulgation of the High Court judgment.
- We therefore direct that either party may apply to the tribunal for the restoration of the appeal to the hearing list within 28 days of the promulgation of the High Court judgment or, in the event of the appeal not proceeding as listed for any reason, by 30 November 2007.
- If, however, the appeal shall ultimately stand dismissed on the basis of our conclusion on Maine's primary argument, we direct that Maine pay the Commissioners' costs of and incidental to and consequent upon the appeal, such costs to be determined by a tax judge in the event of their not being agreed.
20284
VAT — company trading in CPUs — entitlement to input tax credit — whether Spanish purchaser taxable person in another Member State of European Union — no — alternatively whether Spanish purchaser a taxable person under article 4 of the Sixth VAT Directive so that appellant entitled to zero-rate supplies under article 28(c)A — decision deferred pending High Court judgment in JP Commodities Ltd
MANCHESTER TRIBUNAL CENTRE
MAINE DISTRIBUTION LIMITED Appellant
- and -
THE COMMISSIONERS FOR
HER MAJESTY'S REVENUE AND CUSTOMS Respondents
Tribunal: David Demack (Chairman)
Peter Whitehead
Sitting in public in Manchester on 6 July 2007
Tim Brown of counsel instructed by Michael Brookes & Co, chartered accountants, of Middleton, Manchester, for the Appellant
James Puzey of counsel, instructed by the Solicitor and General Counsel for HM Revenue and Customs for the Respondents
© CROWN COPYRIGHT 2007
DECISION
(a) Indigo was not a taxable person in another Member State of the European Union; and
(b) Maine failed to demonstrate due diligence in checking whether Indigo was indeed a taxable person.
| Deal (A) | Deal (B) | Deal (C) | |
| Deal Date | 7 November 2005 | 16 November 2005 | 24 November 2005 |
| Blade 1 Stock Offer to Maine Distribution ("MD") | 10,000 GIGA-CPU 7073 for Programming 2G (Part No. J996F05011) @ £80.00 | 7,600 GIGA-CPU 7073 for Programming 2G (Part No. J996F05011) @ £80.10 | 8,950 GIGA-CPU 7073 for Programming 2G (Part No. J996F05011) @ £80.05 |
| Supplier Declaration Form | Blade 1 Limited signed by Bilal Patel | Blade 1 Limited signed by Bilal Patel | Blade 1 Limited signed by Bilal Patel |
| MD Order No. | 0001A | 0002A | 0003A |
| Order Value | £800,000.00 | £608,760.00 | 716,447.50 |
| VAT | £140,000.00 | £106,533.00 | £125,378.31 |
| Total | £940,000.00 | £715,293.00 | £841,825.81 |
| Blade 1 Invoice No. | MD71105/A | MD161105/A | MD241105/A |
| Intra Account Transfer Order No. | (n/a – dates from Bank statement of MD) | From MD to Blade 1 on 25/11/05* | From MD to Blade 1 on 28* & 29/11/05 |
| Amount (1) | £328,500 – 16/11/05 | 0423429 - £200,000.00 | 0426989 - £103,898.31* |
| Amount (2) | £275,000 – 16/11/05 | 0423315 - £300,000.00 | 0428026 - £235,000.00* |
| Amount (3) | £217,500 – 22/11/05 | 0423564 - £127,000.00 | 0430078 - £287,927.50 |
| Amount (4) | £119,000 – 28/11/05 | 0426974 - £88,293.00 (*28/11/05) | 0430370 - £215,000.00 |
| Total | £940,000.00 | £715,293.00 | £841,825.81 |
| Blade 1 allocated stock to: | Amber Worldwide, c/o Transglobal Ltd, Feltham, Middlesex | Amber Worldwide, c/o Transglobal Ltd, Feltham, Middlesex | Amber Worldwide, c/o Transglobal Ltd, Feltham, Middlesex |
And in all three cases it sold exactly the same stock to Indigo:
| Deal (A) | Deal (B) | Deal (C) | |
| Deal Date | 7 November 2005 | 16 November 2005 | 24 November 2005 |
| MD Stock Offer to Indigo Light | 10,000 GIGA CPUs @ £82.40 | 7,600 GIGA-CPUs @ £82.50 | 8,950 GIGA CPUs @ £82.45 |
| Indigo Purchase Order No. | 051107/1 | 051116/1 | 051124/1 |
| Customer VAT No. | B63547277 | B63547277 | B63547277 |
| Indigo Order Value | £824,000.00 | £627,000.00 | £737,927.50 |
| VAT | N/a | N/a | N/a |
| Total | £824,000.00 | £627,000.00 | £737,927.50 |
| MD Invoice No. | 0001A | 0002A | 0003A |
| Confirmation of Payment (MD letter to Indigo) | Payment from Indigo to MD | 25/11/05 from Indigo to MD | 29/11/05 from Indigo to MD (*28/11/05) |
| Amount (1) | £330,000 – 16/11/05 | 0423428 - £200,000.00 | 0427920 - £235,000.00* |
| Amount (2) | £276,500– 16/11/05 | 0423415 - £300,000.00 | 0430059 - £287,927.50* |
| Amount (3) | £217,500– 22/11/05 | 0423552 - £127,000.00 | 0430344 - £215,000.00 |
| Total | £824,000.00 | £627,000.00 | £737,927.50 |
| MD requested Amber Freight to allocate stock to: | Indigo Light SL, 08036 Barcelona, Spain using Freight Connections, 1422 XT Uithoorn, Netherlands as the Freight Forwarder | Indigo Light SL, 08036 Barcelona, Spain using Freight Connections, 1422 XT Uithoorn, Netherlands as the Freight Forwarder | Indigo Light SL, 08036 Barcelona, Spain using Freight Connections, 1422 XT Uithoorn, Netherlands as the Freight Forwarder |
| Release Note | 25 November 2005, quantity 7,600 units to Indigo Light | 29 November 2005, quantity 8,950 units to Indigo Light | |
| Insurance | Indigo Light SL | Indigo Light SL | Indigo Light SL |
| Confirmation of Payment to Amber Freight | £8,812.50 for all 3 deals on 29 November 2007 | £8,812.50 for all 3 deals on 29 November 2007 | £8,812.50 for all 3 deals on 29 November 2007 |
Maine did not make payment for the goods supplied to it until it had been paid in full for them by Indigo. And when payment was in fact made, since Blade 1, Maine and Indigo all banked with First Curacao Investment Bank, all that happened was that moneys were transferred between accounts. Maine recorded that the goods were insured by Indigo Light whilst being transported.
(a) The deals had been funded by an unsecured loan of £317,000 obtained by Maine from Liberty International, a company based in Colarado, and granted on the evidence of nothing more than a copy driving licence and utility bill of Mr Patel, Maine's director. The loan moneys had been transferred from the First Curacao Investment Bank account of Liberty International to that of Maine.
(b) The VIES showed Indigo as having been deregistered for VAT on 19 October 2005 – before any of the three deals took place.
(c) Instead of the goods being transferred to Spain, as might have been expected, they were consigned to a freight forwarder in Holland.
(d) There was doubt about the authenticity of the goods concerned.
It is common ground that the deals were funded as mentioned at (a) above, and that the goods were delivered by Amber Worldwide to Freight Connections, Withoorn, Holland.
"Information on this Company [Indigo] on the Consolidated Database does not contain, as of today's date, any details on trade in currency in the financial year 2004, or 2005.
As regards acquisitions and supplies within the Community, the following VIES entries were found for the period under investigation:
| Financial Year 2005 | Total acquisitions | Total Supplies | Total Supplies |
| Quarter | Declaration 349 | Entered on VIES | Declaration 349 |
| 1st Quarter | 857,647 | ||
| 2nd Quarter | 6,047,205 | ||
| 3rd Quarter | 2,939,836 | ||
| 4th Quarter | |||
| Total | 9,844,688 |
The following quarterly VAT returns were filed during the period under investigation:
Schedule of Self Assessments:
| NIF | Document | Current account rate | Amount | State | Form | Financial Year | Quarter |
| B63547277 | 3032511562193 | Negative | 0.00 | Registered | 300 | 2004 | 4th |
| B63547277 | 3032511562193 | Negative | 0.00 | Registered | 300 | 2004 | 3rd |
| B63547277 | 3032511562193 | Negative | 0.00 | Registered | 300 | 2004 | 2nd |
Under the heading "Maintenance of preventive information" the following statement was included on the Consolidated Database, "This company was officially removed from VIES following an inspection in which it could not be traced, preventing intra-Community acquisitions and external activities" so that it could be considered by the management bodies in the event of its applying for refunds of VAT in the near future.
In respect of the above, and in the judgment of the undersigned inspector, it is proposed to file the case, without prejudice to any future action which may be ordered."
"We act as legal advisors to the Spanish Company "Indigo Light S.L." which is 100% owned by Mr Harish Mavji Manji.
Please note that Indigo Light S.L. is a duly registered Spanish company with Tax Identification Number ("CIF") B-63547277. In accordance with Spanish law, the Company has complied with all the legal requirements to carry on its activity within Spain and abroad. Likewise, Indigo Light S.L. is registered as a Spanish taxpayer for all applicable taxes including, in particular, Value Added Tax ("VAT"). Indigo Light S.L's CIF, ES B-63547277, is also its Spanish VAT number.
Indigo Light S.L.'s VAT number is not currently activated on the VIES system so it is not possible to verify the validity of its registration through this intra-Community system. Indigo Light S.L. has initiated the appropriate legal procedures to reinstate its registration in the VIES system. In the meantime, as explained above, Indigo Light S.L. is duly registered with a Spanish VAT number which is totally valid for carrying on its activities in Spain and internationally.
Please do not hesitate to contact us if you require further information or have any query."
"1. When was Indigo Light SL (IL) VAT number B83547277 originally registered for VAT in Spain (presumably this could be an earlier date that that shown on VIES)?
October 19th 2005. [This answer is incorrect. The date given is the date on which Maine was deregistered].
2.. What is IL's stated trading activity?
Wholesale sale and purchase of other products.
3.. Did IL apply to the "Census Declaration" to be put on the register of intracommunity traders as of 1/3/05?
The company was given a Tax Identification Number for all Tax Purposes on June 18th 2004. On March 1st 2005 they applied to be included in the VIES register.
4.. What are the criteria / requirements for being put on the intracommunity register? Is it necessary to submit evidence of intra EC trading, details of suppliers / customers etc? Or can anyone simply say they might do Intra EC trading at some stage in the future and get put on it?
The Tax Identification Number (Numére de Indentificaçion Fiscal) is a unique number for all tax purposes.
The Business Tax is a local tax that entitles someone to practice a profession or an economic activity.
All the taxpayers doing business in Spain must be included in this roll but not all the taxpayers included in this roll are included in the VAT Intracommunity Traders (Registro de Operadores Intracommunitarios (ROI) that is the VIES register. In order to be included in this Register a specific request on the Form 036 is required. We have a maximum period of six months to answer the requests to be included on the VIES register but usually, when no risky factors are detected, the delay is less than fifteen working days. When the decision is favourable the taxpayer is immediately included in the VIES register.
5.. Subject to the response to the above, what details did IL provide about its intra EC trading?
See number 4
6.. Was IL removed from the intra EC register by Spain on 19/10/05?
Yes
7.. If so, what were the grounds for this removal?
The company was suspected of being involved in a fraud scheme. It was not located and did not show any commercial activity. It simply has a service of address provision and sends all the correspondence to Great Britain.
8.. If so, can you please provide the legal basis (under Spanish VAT legislation) for the action taken by Spain to remove IL from the intra EC register?
See the attached documents number 1 and 2 based on article number 14.3 Real Decrato 1041/2003. In these documents the Spanish Tax Agency declares the company Indigo Light to be withdrawn from the VIES register due to the reason stated in number 7. [The information contained in attached documents 1 and 2 is included in the remainder of our findings of fact].
9.. IL was stated in the report from Spain of 27/2/06 to be missing. Has IL now been found and if so what is the correct address? Was any explanation given as to why it became "missing"?
The company was not found. It was withdrawn from the VIES Register and they did not appeal this decision or declared any Intra-Community acquisition or supply after this.
10.. Has IL submitted Spanish VAT returns as stated by the accountant in his letter of 16/3/06?
The company has never declared any Intra-Community acquisition or supply.
11.. If a Spanish trader conducts EC trade (as IL has done) at a date when it was not on the Intracommunity register, would Spain impose any sanctions or penalty for this breach of legislation? If so, precisely what action would Spain take?
Spain will not impose any penalty for this but, if your trader has sold goods to a person in Spain that is not registered in the VIES system, the supply will not have an exemption in your country unless your specific legislation provides something different.
Under the Spanish law, if a company registered in Spain sells goods to a company registered in a EC member state, and the Spanish company is requested by the Spanish Tax Administration to provide evidence that the Foreign Tax Administration has granted the Foreign company a VAT identification number for Intracommunity VAT purposes at the moment of the transactions, and the Spanish company cannot provide this evidence, the VAT exemption, granted for Intracommunity transactions under article 25 of the Spanish VAT law (Law 37/1992, 28 December), will not be applicable."
"Regulations may provide for the zero-rating of supplies of goods, or of such goods as may be specified in the regulations, where –
(a) the Commissioners are satisfied that … the supply in question involves both –
(i) the removal of the goods from the United Kingdom; and
(ii) their acquisition in another member State by a person who is liable for VAT on the acquisition in accordance with provisions of the law of that member State corresponding in relation to that member State, to the provisions of section 10; and
(iii) such other conditions, if any, as may be specified in the regulations or the Commissioners may impose are fulfilled."
"Where the Commissioners are satisfied that —
(a) a supply of goods by a taxable person involves their removal from the United Kingdom,
(b) the supply is to a person taxable in another member State,
(c) the goods have been removed to another member State,
(d) the goods are not goods [to which a margin scheme applies],
the supply, subject to such conditions as they may impose, shall be zero-rated".
(a) the customers' VAT number is shown on the invoice;
(b) the goods are exported out of the UK to another member State; and
(c) satisfactory commercial documentary evidence is held that the goods have been removed from the UK.
(a) intra-Community acquisitions of goods for consideration within the territory of the country by a taxable person acting as such or by a non-taxable legal person where the vendor is a taxable person acting as such who is not eligible for the tax exemption provided for in Article 23 and who is not covered by the arrangements laid down in the second sentence of Article 8(1)(a) or in Article 28b(B)(1).
(a) it was still on both Spanish registers at the time of the three transactions with Maine in November 2005; and
(b) even if Indigo had been removed from the ROI, it nevertheless still had a valid VAT number, and had not, nor ever had been, de-registered for VAT.
DAVID DEMACK
CHAIRMAN
Release Date: 6 August 2007
MAN/06/0611