First-tier tribunal decision in Virgin Media Ltd

The First-tier Tribunal has held in the Virgin Media Ltd case ([2020] UKFTT 0030 (TC)) that a supplemental monthly payment handling charge was not payment for a separate exempt supply of payment handling services. Even though the charge was incurred as the customers buying media services elected not to pay by direct debit, the payment is part of the single standard-rated supply of media services.

In this case, customers who bought media services that were provided by Virgin Media Ltd (VML) contracted also with Virgin Media Payments Ltd (VMPL) for the payments. Invoices issued by VMPL included the payment handling charges where applicable.

The tribunal held that the media services could not be obtained without the payment handling services if the customers were not paying by direct debit. These services thus comprised a single standard-rated supply by VML as they were closely linked. In any case, the tribunal observed that VPML's supply of payment handling services would not be exempt in accordance with ECJ decision in Bookit Ltd v HMRC (Case C-607/14), HMRC v National Exhibition Centre Ltd (Case C-130/15) and DPAS Ltd v HMRC (Case C-5/17).

DLA Piper comment: The ECJ decisions make it very difficult for taxpayers, outside the banking sector, to treat payment handling services as a separate exempt supply. The arrangements did not constitute abuse, because although the payment handling carried out by a separate entity was not viewed as a separate profit making activity, it was part of the streamlining of the taxpayer’s business.

Consultation on UK Global Tariff and Freeports

The Department for International Trade launched a consultation on the design of the post-Brexit UK global tariff on 6 February 2020, in order to create a UK tariff with UK-specific rates of duty on imported goods.

Tariff rates under the new rules are expected to be set by balancing different factors, including the interests of UK consumers and producers and competition. In principle, the new tariff will apply to imported goods unless they are covered by an exception to the most favoured nation principle such as an applicable free trade agreement. The draft governing principles are as follows:

  • Tariff banding – existing tariffs are rounded down to the nearest multiple of 2.5% for tariffs under 20%; 5% for tariffs between 20% and 50%; and 10% for tariffs above 50%.
  • How agricultural tariffs might be expressed as ad valorem tariffs are being considered.
  • Existing tariffs of 2.5% or less would be removed altogether. Tariffs on goods typically used to produce other goods in the UK (including goods imported for processing and goods currently benefiting from a suspension of tariffs) would also be removed.
  • Tariffs on goods that are not, or are hardly, produced in the UK (and, therefore, do not compete with existing UK producers) would also be removed.

The new regime is expected to apply from 1 January 2021 (the first day after the end of the transition period).

DLA Piper comment: The UK is preparing its own customs code from 31 December 2020, which would also apply to goods passing from outside the EU including the EU27, in the absence of a free trade agreement.

Freeports Consultation

On 10 February 2020, the Department for International Trade started a consultation process on its proposed freeports policy, under which favourable customs and tax rules (as well as other benefits) may apply within designated zones. In this proposal, the government signalled the intention to create up to ten freeports in the UK, including multiple customs zones and special economic zones (offering tax and other incentives) to encourage businesses to invest in freeports.

The government is also consulting on:

  • Planning reforms, which will release more land for development of freeports and liberalise the associated planning process.
  • New infrastructure to encourage business and related activities in freeports and the surrounding areas.
  • Regulatory flexibility to encourage freeports to function as innovative hubs for new technologies, along with initiatives to bring together ports, businesses and innovators.

The location of the freeports is expected to be announced by the end of 2020.

DLA Piper comment: This is an exciting development for the UK as it aims to boost infrastructure and investment both in the north and the south.