The VITA View

Welcome to The VITA View, our new regular blog where we comment on all Indirect Tax matters that have caught our eye and which we think should catch yours, too. 

05 November 2024 - Our first blog
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EU publishes new information factsheets for non-EU producers of CBAM goods – why this is important for UK (GB and NI) suppliers of CBAM goods
 
The EU has published new CBAM information factsheets for producers of CBAM goods in non-EU countries.

The factsheets will be helpful for GB (and potentially NI) suppliers producing CBAM goods which are subsequently exported to the EU.
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Key information is provided on all CBAM products in the impacted sectors: aluminium, iron and steel, cement, fertilisers, hydrogen and electricity, and the documents explain:
  • which goods fall within the relevant sector;
  • how embedded emissions of CBAM goods should be determined; and
  • how third country operators will be able to provide information (emissions data) directly to the European Commission via the operator’s portal of the CBAM registry.

Shrinking the Information Gap
This final point could be of particular help to those EU importers who have been unable to source actual data from their third country suppliers to date in order to meet the EU’s compliance standards from 1 January 2025.

The European Commission appears to be recognising that at least part of the difficulties which importers have faced in obtaining this information has been as a result of suppliers’ reluctance to share this data due to commercial confidentiality and reputational sensitivity.

The Commission notes that this step should also ease the administrative burden as direct reporting will build the datasets within the EU CBAM registry to which multiple importers will be able to refer confidentially.

It will of course also assist the Commission in its objective of obtaining accurate emissions data and compliance from importers in respect of their reporting obligations.

This initiative will doubtless be welcomed by those importers who have been unable to obtain this information from their third country suppliers and also reaffirms the EU’s commitment to removing impediments for third country operators reporting embedded emissions data to the EU standard.

Commercial Considerations
Despite EU importers only having to report their CBAM obligations and not yet being obliged to make payments at this stage of the transitional phase, a failure to report accurate emissions data could lead to significant fines for non-compliance.

In light of the announcement of direct reporting of embedded emissions for non-EU providers, and therefore of note to relevant GB and NI suppliers, it is to be expected that commercial pressure from EU customers who are importers is likely to increase, given the growing fiscal and environmental reputational risk for non-compliance within the bloc.

In addition, where these are not already extant, we would expect contracts between EU importers and their third country suppliers increasingly to contain terms which cover the respective responsibilities of the contracting parties regarding their emissions data requirements. These will become ever more commercially pertinent as the EU CBAM moves beyond its initial transitional phase from 1 January 2026. 

If you have any queries on CBAM or any related issues please contact Craig.

#CBAM

Craig Stobo

M: 07703 685 163

[email protected]

a4_cbam_factsheet_en_aluminium_v02.pdf
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a4_cbam_factsheet_en_cement_v02.pdf
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a4_cbam_factsheet_en_fertilisers_v03.pdf
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a4_cbam_factsheet_en_hydrogen_v2.pdf
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a4_cbam_factsheet_en_iron___steel_v02.pdf
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a4_cbam_factsheet_en_electricity_v03.pdf
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06 December 2024 - Is it Car or a Van?
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Transitioning from the banking sector into the world of VAT has introduced a fascinating challenge: understanding the VAT treatment of various items and the discrepancies between HMRC’s perspective and the general public’s view.

One area that has really intrigued me is determining whether HMRC considers a vehicle to be a car or a van, a question we have been asked a few times in my tenure.  This issue has gained attention due to the recent HMRC announcement on classifying double-cab pickups as cars, rather than commercial vehicles, for capital allowances and Benefit-in-Kind purposes.  However, despite these changes, the VAT treatment for such vehicles remains unchanged, which makes this even more complicated.  Regular readers of our newsletter may recall we commented on this at the start of the year, when HMRC initially proposed the introduction of these changes only to reverse their decision a week later.  This inconsistent approach highlights the complexities of classifying a vehicle, especially with there being different answers for different taxes.  

So, for now double-cab pickups remain as vans for VAT purposes with no change announced for this, however as the classification of these has historically mirrored the capital allowances and Benefit-in-Kind VAT treatment and with the knowledge the changes don’t come into effect until April 2025 there is every chance that HMRC change the VAT treatment to match them.   

As for all other types of vehicles, there are several factors to consider when determining the VAT treatment of a vehicle, including payload, number of seats, and windows.  The classification becomes even more interesting with car-derived vans and van-derived cars! 
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Needless to say it’s not just a matter of simply looking at a vehicle to know how it should be treated for VAT, if you or a client need assistance in classifying a specific vehicle, please contact us to see how we can help.

21 January 2025 - Let's get this straight
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We start the new year with an interesting update on an ongoing VAT dispute with the Align group, who supply Invisalign clear aligners.  The Align group has historically treated these as VAT-exempt under group 7 of schedule 9 of the Value Added Tax Act 1994, on the basis that they are “dental prosthesis”.
 
This was challenged by HMRC in June 23, as it did not believe Align provided orthodontic services, which was key to these aligners being eligible for the exemption. HMRC then followed up with VAT assessments for historic periods covering August 22 to May 23.
 
Whilst Align started accounting for VAT on the supplies of aligners from September 23, it also began proceedings to challenge this, which included a statutory review of the VAT assessments. When the review was subsequently upheld in HMRC’s favour, Align appealed to the First Tier Tribunal (“FTT”).  This appeal was due to be heard this month however, before this could happen, HMRC wrote to Align, withdrawing the assessments but also stating that “this is not a concession that the decisions were wrong in law”. 
 
This is where it gets interesting.  HMRC wrote to the FTT, to advise that they had withdrawn the assessments which were being appealed. This resulted in the FTT writing to Align, to advise that the case would be struck out.  Align followed this up with HMRC, to confirm if this meant that they accepted that Align’s treatment of the aligners was legally correct, to which HMRC maintained they had not made any legal concessions.  Align subsequently requested the FTT hearing continue, to determine if HMRC, in reaching the settlement, had not only withdrawn the assessment but also confirmed a decision on the aligners’ VAT liability.
 
The FTT concluded that although the assessments had been withdrawn, the appeal should be heard to resolve the issues of Align’s liability moving forward.

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