In Healthspan Ltd (2) v HMRC  UKFTT 509 (TC), the Firsttier Tribunal (FTT) considered whether goods ordered by internet and by post, which were delivered by post (the relevant goods), were within Article 32 or Article 33 of the Principal VAT Directive (the PVD), in the light of the findings of fact set out in an earlier decision of the FTT in this case, and the guidance provided by the judgment of the Court of Justice of the European Union (CJEU) in KrakVet Marek Batko sp.k. v Nemzeti Adó és Vámhivatal Fellebbviteli Igazgatósága (Case C 276/18) (KrakVet).
Healthspan Ltd (Healthspan), a company registered in Guernsey, sold nonprescription health products to retail customers, who placed orders by telephone, by internet or by post. Between 1 April 2012 and 31 January 2016, the overwhelming majority of Healthspan’s products were despatched from a warehouse in the Netherlands and delivered to customers in the UK. Healthspan appealed to the FTT against: (1) a decision of HMRC that during the relevant period the goods had been delivered “by or on behalf of the supplier” and so came within Article 33 of the PVD, implemented in the UK by section 7(4), Value Added Tax Act 1994 (VATA 1994), the goods had therefore been supplied in the UK and therefore to register Healthspan for VAT retrospectively, with effect from 1 April 2012; and (2) a VAT assessment issued by HMRC on this basis. Healthspan appealed to the FTT on the basis that its customers had contracted with a separate company for delivery of the goods and as a result Article 32 of the PVD applied.
The FTT had made a reference to the CJEU regarding the relevant goods, which was stayed behind KrakVet. Following the CJEU's judgment in KrakVet, the FTT withdrew the reference. Applying the guidance in KrakVet to the facts of the case as determined in the FTT's earlier decision, the FTT concluded that the relevant goods were within Article 33, and therefore dismissed the remaining part of Healthspan's appeal.
Why it matters: This decision will be disappointing for the numerous other taxpayers which utilised such arrangements to minimise their VAT liability. However, following the UK's exit from the EU, the distance selling rules no longer apply in the UK and therefore the decision will be of limited relevance going forward.
The decision can be viewed here.