On December 11, 2015 the UK HM Revenue and Customs published Revenue & Customs Brief 22 (2015): changes to VAT regulations following judgment in the case of Le Credit Lyonnais (C-388/11).  The purpose of the Revenue and Customs Brief Brief is to give notice of changes to UK legislation following the decision of the Court of Justice of the European Union (CJEU) in Le Credit Lyonnais.

 

On September 12, 2103 the CJEU ruled as follows in Case C-388/11 Le Crédit Lyonnais versus Ministre du Budget, des Comptes publics et de la Réforme de l’État: 

1.     Article 17(2) and (5) and Article 19(1) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment, must be interpreted as meaning that, in determining the deductible proportion of VAT applicable to it, a company, the principal establishment of which is situated in a Member State, may not take into account the turnover of its branches established in other Member States.

2.     Article 17(3)(a) and (c) and Article 19(1) of the Sixth Directive 77/388 must be interpreted as meaning that, in determining the deductible proportion of VAT applicable to it, a company, the principal establishment of which is situated in a Member State, may not take into account the turnover of its branches established in third States.

3.     The third subparagraph of Article 17(5) of the Sixth Directive 77/388 must be interpreted as not permitting a Member State to adopt a rule for the calculation of the deductible proportion per sector of business of a company subject to tax which authorises that company to take into account the turnover of a branch established in another Member State or in a third State.

 

Click here to be forwarded to the judgement in Case C-388/11 as available on the website of the CJEU.

 

The HMRC writes that to reflect that decision, the March 2015 Budget announced its plans to exclude supplies made by overseas branches from partial exemption methods. As a result of feedback on the subsequent consultation, it has now narrowed the scope of changes to those set out below.

 

Draft regulations to implement the necessary changes were exposed for a limited consultation in October 2015. According to the Revenue and Customs Brief the draft regulations have been revised in response to comments received.

 

The Revenue and Customs Brief discusses a.o.: 

·        Changes to the VAT Regulations 1995

o       Regulation 101 (standard method)

o       Regulation 102 (special methods)

o       Regulation 103 (foreign and specified supplies)

·        Operative date of the changes

·        Record-keeping

 

Click here to be forwarded to HMRC’s Revenue & Customs Brief 22 (2015) as available on GOV.UK, which will open in a new window.

 

 

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