© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
S2. Import and acquisition of goods
GENERAL
- Import and intra-community acquisition not comparable
"[56] As Teleos and Others and the Commission correctly maintain and as the Advocate General observed in points 78 to 82 of her Opinion, the application of customs duties to imports from outside the European Union and the imposition of VAT on intra-Community acquisitions are not comparable transactions.
[57] The regime applying to intra-Community trade lays down the division of powers in tax matters in the internal market and permits the tax authorities to resort to both the supplier and the purchaser to obtain payment of the VAT, whereas, under the common customs regime, duties are recoverable only from the importer. It follows that the case-law cited in paragraph 54 of the present judgment is not applicable to the case which is before the national court." (Teleos C-409/04)
CUSTOMS PROCEDURES
- No import where goods placed under customs procedure
"[45] Consequently, those goods have been placed since their entry into the Community under the two arrangements referred to in Article 16(1)(B)(c) of the Sixth Directive.
[46] Since the goods at issue had not yet left those arrangements at the date of the sale at issue, even though they had been physically introduced into the territory of the Union, they cannot have been the subject-matter of an ‘importation’ within the meaning of Article 2(2) of the Sixth Directive (see, to that effect, Case C-305/03 Commission v United Kingdom [2006] ECR I-1213, paragraph 41)." (Profitube C-165/11)
- Change of customs procedure does not mean imported
"[47] In that respect, the fact that those goods changed customs arrangement does not confer on them the status of imported goods, the two customs arrangements concerned being referred to in Article 7(3) of the Sixth Directive." (Profitube C-165/11)
Sale whilst in customs warehouse
- Customs warehouses are part of the territory and thus within the scope of VAT
"[59] Consequently, for the purposes of Article 2(1) of the Sixth Directive, a customs warehouse is ‘within the territory of the country’ where it is situated in the territory of a Member State.
[60] Moreover, it should be noted that Article 2(1) of the Sixth Directive does not make any distinction according to whether a supply concerns Community goods or not. Therefore, contrary to what Profitube maintains in its written pleadings, the fact that the goods in question have not given rise to an importation did not, in itself, exclude the existence of a supply in the territory of a Member State.
[61] Having regard to the foregoing, it must be held that, in principle, a sale such as that at issue is subject to VAT under Article 2(1) of the Sixth Directive, the chargeable event taking place at the date on which the supply of goods is effected, in accordance with Article 10(2) of that directive." (Profitube C-165/11)
- Power to exempt certain transactions within warehouses
"[62] However, Article 16(1) of the Sixth Directive, with regard to the arrangements referred to in (B) and (D) of that paragraph, provides that Member States may exempt from VAT supplies of goods intended to be placed under a customs warehousing procedure or inward processing arrangements, or supplies carried out at the places listed in (B), (a) to (d), where one of those situations is maintained, provided those transactions are not aimed at final use and/or consumption and that the amount of VAT due on cessation of the arrangement corresponds to the amount of tax which would have been due had each of those transactions been taxed within the territory of the country.
[63] Member States may therefore exempt certain transactions carried out within the country in respect of goods placed under the arrangements or situations referred to in Article 16(1), (B) and (D), including the customs warehousing procedure, inward processing arrangements and transactions carried out in a customs warehouse (see, to that effect, Commission v United Kingdom, paragraph 40)." (Profitube C-165/11)
ONWARD SUPPLY RELIEF
- Conditions for relief
"[145] Onward supply relief is a derogation from the general rules regarding VAT on the supply of goods, and provides a cashflow advantage to suppliers who would otherwise have to account for VAT on import and then recover that VAT by allowing the supplier to zero-rate imports of goods which are subsequently supplied to a taxable person in another member state. Given the risk to the exchequer, claimants are required to comply with a number of statutory requirements (Regulations 123 and 128 VAT Regulation 1995). In particular, HMRC must be satisfied that:
(1) there is a supply of the imported goods;
(2) the goods have been removed to another member state; and
(3) the supply is to be a person taxable in another member state.
[146] In addition, VAT Notices 725 and 707 require that valid commercial evidence of removal within the three month time limit is obtained and kept." (Conqueror Trading Limited v. HMRC [2025] UKFTT 1335 (TC), Judge Fairpo)
- No relief where T unable to show it took title to the goods
"[153] We find that the appellants have failed to discharge the burden of proof on them to show that they were entitled to claim the relief. They were unable to show that they had taken title to the goods imported and so could not show that they had made a supply of them; they were also unable to show that they could have transferred title to customers. They were required to obtain and keep required commercial evidence. They did not do so: they did not query errors on documents and they did not pursue missing documents. The requirement (Notice 725) is to get and keep this evidence, it is not to attempt to obtain it when HMRC request it." (Conqueror Trading Limited v. HMRC [2025] UKFTT 1335 (TC), Judge Fairpo)
TAXABLE AMOUNT
- Transport costs not necessarily included in taxable amount for goods
"[32] As regards the taxable amount relating to the importation of goods, it is clear from Article 85 of the VAT Directive that that amount is formed by the value defined as the value for customs purposes of those goods by the provisions of EU law in force at the time. Article 86(1)(b) of that directive states that that taxable amount must, in so far as they are not already included, take account of incidental expenses, including the cost of transport to the first place of destination of the goods within the territory of the Member State of importation as well as those resulting from transport to another place of destination within the European Union, provided that the other place is known when the chargeable event occurs.
[33] In the light of a combined reading of Articles 85 and 86 of the VAT Directive, from which it is apparent that those transport costs are not necessarily included in the value for customs purposes of imported goods, and if Article 86 is not to be deprived of its effectiveness, it cannot be held that the recording of an import transaction entails, on that very same basis and systematically, that the costs of that transport carried out by a taxable person between the Member State in whose territory the place where those goods are introduced into the European Union is situated and a place of destination in another Member State are included in the taxable amount for VAT purposes of the imported goods. If they are not already included in the value for customs purposes, which must first be verified, those costs must then be included in the taxable amount for VAT purposes of the imported goods, in accordance with the requirements of Article 86(1)(b) of the VAT Directive." (Cartrans Preda C-461/21)
VALUATION
- No evidence to support actual transaction value (method 1) where prices inexplicably low
"[134] Considering all of the submissions and the documents before us, we find that there is no evidence to support the contentions that the declared value was the actual transaction value. Overall, there was no evidence to support the contentions as to the reasons for the apparent low prices on the invoices; Mr Wernick's statements were not supported by any documentary evidence. The only offer email made no reference to the reason for the very low price for the goods (and was sent four weeks after the goods were apparently shipped to Conqueror). Mr Wernick had no direct knowledge of the goods imported and had no involvement with the purchases of those goods; he did not even have access to the email account to which the agents sent offers. His statements as to the reasons for the low prices varied and they were either a repetition of what he had been told by MK, or speculation as to what might have happened.
[135] There were also significant inconsistencies in the documentation which was provided and a lack of credible explanation for the failure of the appellants to pay significant sums to suppliers. There was no credible explanation for the goods being declared in the UK when imported into Germany and ultimately transported to Eastern Europe." (Conqueror Trading Limited v. HMRC [2025] UKFTT 1335 (TC), Judge Fairpo)