| |
Home > Publications > Selected cases — Parliamentary > Selected Cases and Summaries of Completed Investigations - November 1997 - April 1998 > C.828/95
Full Text of Selected Cases
CUSTOMS AND EXCISE
Delay in issuing a value added tax certificate
3.1 An agent complained on behalf of Mr A that Customs delayed sending him a value added tax (VAT) certificate for over two years. Mr A wished to import a boat to France for his personal use. VAT had been paid by the boat's former owner, a United Kingdom (UK) resident, and was available to be set against Mr A's liability to French VAT. Mr A was forced to pay additional expenses to keep the boat in the Channel Islands until the VAT certificate was issued.
Background
3.2 Before the completion of the single market on 1 January 1993, if goods were imported into a member state of the European Community (EC), VAT was normally paid on their full value at the time of their importation. However, when goods were imported from another member state, and the importer could show that VAT had already been paid on the goods in an EC country, that amount of VAT could be offset against the VAT due on importation.
3.3 As far as imports into the UK were concerned, it was possible to claim a reduction in the VAT paid on importation provided the goods were not to be used in the course of a business; evidence was presented to show that VAT had already been paid; and Customs were satisfied that the original VAT had not been and would not be repaid. For those purposes a copy of the sales invoice or similar commercial document would have been acceptable as evidence, provided it showed enough details to identify the goods, their price, and either the rate of VAT or the amount of VAT charged. Customs would not therefore have required a certificate from a tax authority in another member state in order to apply the relief. Equally, Customs did not as a matter of normal practice issue certificates at the time Mr A wished to import his boat into France.
Back to top
Summary of events
3.4 1988: In February 1988 a boat was imported to the UK and VAT of £19,500 was paid by the importing company. In March a Jersey-based company agreed to buy it from the importing company for £172,000, including £22,434 VAT, for which the importing company duly accounted to Customs. The Jersey company, as a non-EC based company, was not eligible to recover the VAT as input tax and the importing company did not reclaim it.
3.5 1989: The importing company was later asked to act as broker in re-selling the boat. They arranged a sale to Mr A for £130,000, which he completed in August 1989. He wanted to move the boat to France and was advised that under EC law the unrecovered VAT on the previous sale could be offset against his liability to French VAT.
3.6 1990: On 12 July 1990 the importing company, on behalf of Mr A, asked a Customs local VAT office (the LVO) to provide a certificate that the VAT had been paid and not reclaimed. On 19 September the LVO refused, saying that it was not Customs' responsibility to provide such certification for commercial agreements.
3.7 1991: French customs authorities endorsed UK Customs' letter of refusal on 18 April 1991 with a note explaining that they needed confirmation from UK Customs that the VAT had not been recovered before they allowed Mr A credit for it. That note was forwarded to the LVO. On 15 June Mr A sent the LVO a statement from his accountants about the history of the boat with documentary evidence that the VAT on the previous transaction had not been recovered.
3.8 1992: Mr A visited the LVO (on a date not recorded) and was asked to obtain an affidavit from the importing company swearing to the details of the transactions. The affidavit was signed on 1 December 1992.
3.9 1993: On 12 January 1993 the LVO provided a handwritten note addressed ‘to whom it may concern' and mistakenly dated 12 January 1992, confirming that VAT of £19,500 had been paid within the UK and that no corresponding input tax had been claimed. (In fact it was the VAT of £22,434 referred to in paragraph 3.4 that had been paid and not recovered.) On 2 July Mr A's solicitors complained to Customs that while waiting for the confirmation Mr A had lost the amenity of the boat, had been unable to sell it, its value had fallen and he had incurred expenses keeping it moored in the Channel Islands. They estimated his losses at about £25,000. The LVO replied on 23 July that the delay was Mr A's responsibility because he had not provided the affidavit sooner. The solicitors pointed out on 5 August that Customs had not suggested at the outset that an affidavit was required: they had simply refused to provide a certificate. Correspondence continued until 10 March 1994 with the LVO insisting that they had had no obligation to provide a certificate but had done so in a spirit of co-operation.
Back to top
Customs' response to the complaint
3.10 In commenting on the complaint, the Chairman of Customs said that while there had been no policy to issue certificates at the time of the importing company's enquiry in July 1990, and the advice given by the LVO was correct, with hindsight it would have been better to have issued a certificate at an early stage in the particular circumstances. It was clear that action should have been taken upon receipt of the request from the French customs authorities in April 1991 and Customs appreciated that loss had resulted to Mr A because no action was then taken.
3.11 The Chairman said that she very much regretted the delay in replying to letters sent on behalf of Mr A and in the conduct of the matter generally. Because of the changed circumstances in the EU following the introduction of the single market such a situation was unlikely to recur. Import documentation will provide evidence of VAT paid on first importation into the EU and can be used as evidence to ensure that no subsequent import VAT is due when a boat moves to another member state.
3.12 The Chairman wrote to Mr A on 12 February 1997 to offer her apologies for Customs' mishandling of the case. She acknowledged that the delays had clearly caused him inconvenience and additional costs during the period that Customs had refused to give him a certificate. She said that it would be appropriate for Customs to recompense him for those losses. Mr A's solicitors then set out for Customs details of the losses. After protracted negotiations Customs agreed at a meeting with Mr A on 23 February 1998 to offer him a total of £50,044.30 in compensation, made up of £20,625 for depreciation (the boat had been offered for sale during the period while the certificate was refused); £16,250 for interest; £4,588 for mooring fees in France; £2,721 for insurance; £3,010.30 for legal fees; £850 for cleaning and maintenance and an additional payment of £2,000 for the inconvenience that Mr A had suffered. I understand that Mr A has accepted that offer.
Findings
3.13 Customs were far too inflexible in their response to the importing company's request for a certificate in July 1990. They should have met that request, particularly when it was endorsed by French customs authorities in April 1991. Customs' request in 1992 for an affidavit from the importing company swearing to the details of the transaction seems to me to have been an unnecessarily severe test to impose but in any case, if it was to be made at all, it should have been made much sooner.
Conclusion
3.14 I regard the Chairman's apology and Customs' offer of a total of £50,044.30 in compensation to be a satisfactory outcome to a fully justified complaint.
17 March 1998
Back to top
Previous < Contents > Next
Short text of this investigation
|
 |
