VAT CASES - 28.10.2016

KJ Services Ltd v Revenue and Customs [2016] UKFTT 140 (TC). Intra-EU supplies

The case. KJ Services Ltd (KJ) had supplied a hydraulic excavator to a Belgian company (C) and zero-rated the sale as an intra EU supply. However, before the machine left the UK, C sold it to W, which then exported it to an Australian company.

The facts. KJ argued that it was entitled to zero-rating on the basis that it knew nothing about C’s sale to W and had provided the evidence of export required by Notice 703 .

HMRC accepted that KJ did not know of the further sale, and did not allege impropriety. However, it assessed on the basis that the supply did not meet the statutory conditions for zero-rating, because:

1. The supply was not a direct export qualifying for zero-rating because KJ, being “the person supplying the goods” had not exported the machine to “a place outside the member states”.
2. The supply was not an indirect export qualifying for zero-rating because it had been exported by W acting as principal rather than as agent for C or KJ.

The supply was therefore standard-rated from inception.

The decision. The First-tier Tribunal (FTT) found that KJ’s supply could not be zero-rated for the reason that neither the Goods Departed Message nor the Bill of Lading met the mandatory conditions laid down by paragraph 6.5 of Notice 703 .

KJ had also failed to comply with paragraph 6.6 of Notice 703 , which sets out the detailed requirements to be followed by traders supplying goods “ex-works.” The FTT therefore dismissed the appeal.