TC09596 - [2025] UKFTT 00895 (TC)

Article 1(2) of the PVD describes the basic system of VAT thus:

“The principle of the common system of VAT entails the application to goods and services of a general tax on consumption exactly proportional to the price of the goods and services, however many transactions take place in the production and distribution process before the stage at which the tax is charged. On each transaction, VAT, calculated on the price of the goods or services at the rate applicable to such goods or services, shall be chargeable after deduction of the amount of VAT borne directly by the various cost components. The common system of VAT shall be applied up to and including the retail trade stage.”

VAT is payable by a taxable person carrying out a taxable supply of goods or services: art. 93 PVD. A “taxable person” is defined as any person who carries out, in any place, any economic activity, whatever the purposes. VAT is charged on “supplies” of goods and services for “consideration”: art. 2(1). VAT becomes chargeable when a supply takes place: art. 63. Articles 14(1) and 24 of the PVD, reflected in s 5, Schedule 4, VATA, define the concepts of “supply of goods” and “supply of services” respectively, in the following terms;

“‘Supply of goods’ shall mean the transfer of the right to dispose of tangible property as owner.”

“‘Supply of services’ shall mean any transaction which does not constitute a supply of goods.”

Article 73 of the PVD, reflected in s 19 VATA, defines, so far as relevant, the “taxable amount” as:

“in respect of the supply of goods or services … everything which constitutes consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party, …”

Article 167 of the PVD provides that:

“A right of deduction shall arise at the time the deductible tax becomes chargeable.”

Article 168, reflected in ss 24(1), 24(2), 26(1) and 26(2) VATA, allows a taxable person the right,

“[i]n so far as the goods and services are used for the purposes of the taxed transactions of a taxable person”, to deduct VAT due or paid “in respect of supplies to him of goods or services carried out or to be carried out by another taxable person.”

Every taxable person who carries out supplies of goods or services in respect of which VAT is deductible must be identified by an individual number: art. 214 PVD.