UT/2024/000069 - [2025] UKUT 00236 (TCC)

Whether or not HMRC were entitled to de-register the Lead Appellants for the purposes of VAT turns on the meaning and application of the case law of the CJEU. It was common ground that, as a result of the provision made by the European Union (Withdrawal) Act 2018 as read with section 42 of the Taxation (Cross-border Trade) Act 2018, the relevant CJEU case law continued to form part of the law of the United Kingdom and was, therefore, relevant to the decisions to de-register the Lead Appellants even though all of the decisions were made after the United Kingdom had left the European Union. It was also common ground that, as a result of the provision made by section 28 of the Finance Act 2024, the provision made by the Retained EU Law (Revocation and Reform) Act 2023 had not changed the position.

We deal with the relevant CJEU case law in the part of our decision addressing HMRC’s appeal.

Relying on the power conferred by s.26B of the Value Added Tax Act 1994, provision has been included as Part 7A of the 1995 Regulations establishing the flat-rate scheme (or FRS). Under the FRS, a taxable person may, if authorised to do so by HMRC, elect to calculate their VAT liability by applying an “appropriate percentage” to the total value of their supplies (taxable or exempt) together with the VAT chargeable on the supplies. The “appropriate percentage” is determined by reference to the category of business carried on by the taxable person.

Under Regulation 55L(1)(d)(iii) of the 1995 Regulations, a taxable person is eligible to be authorised under the FRS at any time if, among other conditions, “he is not, and has not been within the past 24 months …associated with another person”. And, under Regulation 55M(1)(f) of the 1995 Regulations, a person ceases to be eligible if he “becomes” associated with another person.

Regulation 55A(2) of the 1995 Regulations sets out how to determine whether persons are associated with each other:

“(2)

For the purposes of this Part, a person is associated with another person at any time if that other person makes supplies in the course or furtherance of a business carried on by him, and—

(a)

the business of one is under the dominant influence of the other, or

(b)

the persons are closely bound to one another by financial, economic and organisational links.”

Section 1 of the NICS Act 2014 provides for an employment allowance, which entitles employers qualifying for the allowance to make a deduction up to the amount of the allowance from payments of national insurance contributions that they would otherwise be liable to make.

Section 2 of that Act sets out a number of exceptions to that entitlement, including the following provisions relevant to this appeal:

“(10)

A person cannot qualify for an employment allowance for a tax year if, apart from this subsection, the person would qualify in consequence of avoidance arrangements.

(11)

…

(12)

In subsections (10) and (11) “avoidance arrangements” means arrangements the main purpose, or one of the main purposes, of which is to secure that a person benefits, or benefits further, from the application of the employment allowance provisions.

(13)

In subsection (12) “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).”