Avon Cosmetics Ltd v Revenue & Customs [2014] UKFTT 172 (TC) (11 February 2014)

Avon Cosmetics Ltd v Revenue & Customs [2014] UKFTT 172 (TC) (11 February 2014)

The Tribunal found that the Appellant's grievance is justified: the derogation, as implemented, results in incoherent VAT treatment by failing to allow deduction for input tax on costs borne by non-registered representatives, leading to excessive VAT and unfair competition. However, the Tribunal concluded it lacks...

Source-derived case information.

Citation
[2014] UKFTT 172 (TC)
Parties
Appellant: Avon Cosmetics Limited; Respondents: The Commissioners for Her Majesty's Revenue & Customs
Jurisdiction
United Kingdom
Judgment Date
11 February 2014
Procedural Posture
VAT Appeal / First Tier Tribunal (tax) Decision and Reference to ECJ
Outcome
Reference to the European Court of Justice (ECJ) for preliminary ruling.
Legal Topics
Value Added Tax, Input Tax Deduction, Derogation Under Sixth Directive, Unfair Competition, Sticking Tax, Interpretation of VAT Legislation
Tax Law European Union Law Value Added Tax Input Tax Deduction Derogation Under Sixth Directive Unfair Competition Sticking Tax Interpretation of VAT Legislation

Source-derived case record

Summary, issues, holding and outcome

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Parties

Avon Cosmetics Limited

Appellant

The Commissioners for Her Majesty's Revenue & Customs

Respondents

Procedural Posture

VAT Appeal / First Tier Tribunal (tax) Decision and Reference to ECJ

Legal Issues

  1. 1 Whether the UK derogation and its implementation unlawfully prevent deduction of input tax for costs borne by non-registered representatives, resulting in excessive VAT liability for the Appellant.
  2. 2 Whether the Tribunal or ECJ can provide a remedy by interpreting or modifying the derogation, UK statute, or Notice of Direction.
  3. 3 Whether the derogation itself is invalid for breaching fundamental VAT principles and should be set aside.

Ratio Decidendi

The Tribunal found that the Appellant's grievance is justified: the derogation, as implemented, results in incoherent VAT treatment by failing to allow deduction for input tax on costs borne by non-registered representatives, leading to excessive VAT and unfair competition. However, the Tribunal concluded it lacks jurisdiction to remedy this by interpreting or modifying the UK statute or Notice of Direction, as these precisely reflect the EU-authorised derogation. The matter must be referred to the ECJ for guidance on whether such an interpretation is permissible or if the derogation itself is invalid.

Court Disposition

Reference to the European Court of Justice (ECJ) for preliminary ruling.

Orders

  • Questions concerning the interpretation and validity of the derogation, and the possibility of implying input tax deduction into UK law or the Notice of Direction, are referred to the ECJ.