TSI Instruments Ltd v Revenue and Customs (VALUE ADDED TAX - Credit for import VAT as input tax - Importer not owner of goods - whether goods used for the purposes of the business carried on by the taxpayer - Article 168 Principal VAT Directive - ss 24-27 Value Added Tax Act 1994 - EU principle of fiscal neutrality - extent of Marleasing principle) [2025] UKFTT 1278 (TC) (29 October 2025)

TSI Instruments Ltd v Revenue and Customs (VALUE ADDED TAX - Credit for import VAT as input tax - Importer not owner of goods - whether goods used for the purposes of the business carried on by the taxpayer - Article 168 Principal VAT Directive - ss 24-27 Value Added Tax Act 1994 - EU principle of fiscal neutrality - extent of Marleasing principle) [2025] UKFTT 1278 (TC) (29 October 2025)

TSI is not entitled to deduct import VAT as input tax because it is not the owner of the goods and the value of the goods is not reflected in the price of its output transactions. Both EU and UK law require a direct and immediate link between the import VAT and the taxable output transactions, which is not established in this case. The principle of fiscal neutrality does not entitle TSI to deduction where the statutory conditions are not met.

Citation
[2025] UKFTT 1278 (TC)
Parties
Appellant: TSI Instruments Limited; Respondents: The Commissioners for His Majesty's Revenue and Customs
Jurisdiction
United Kingdom
Judgment Date
29 October 2025
Procedural Posture
VAT Appeal / First Tier Tribunal (tax Chamber) Judgment
Outcome
Appeal dismissed
Legal Topics
Value Added Tax, Input Tax Deduction, Import VAT, Fiscal Neutrality, Interpretation of EU Directives, Ownership Requirement for VAT Deduction
Tax Law European Union Law Value Added Tax Input Tax Deduction Import VAT Fiscal Neutrality Interpretation of EU Directives Ownership Requirement for VAT Deduction

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Parties

TSI Instruments Limited

Appellant

The Commissioners for His Majesty's Revenue and Customs

Respondents

Procedural Posture

VAT Appeal / First Tier Tribunal (tax Chamber) Judgment

Legal Issues

  1. 1 Whether an importer who is not the owner of goods is entitled to deduct import VAT as input tax under UK and EU law.
  2. 2 Whether the cost or value of imported goods must be reflected in the price of output transactions for input tax deduction.
  3. 3 Whether the principle of fiscal neutrality is breached by denying input tax deduction in these circumstances.

Ratio Decidendi

TSI is not entitled to deduct import VAT as input tax because it is not the owner of the goods and the value of the goods is not reflected in the price of its output transactions. Both EU and UK law require a direct and immediate link between the import VAT and the taxable output transactions, which is not established in this case. The principle of fiscal neutrality does not entitle TSI to deduction where the statutory conditions are not met.

Court Disposition

Appeal dismissed

Orders

  • TSI Instruments Limited is not entitled to deduct import VAT as input tax for the relevant periods.
  • The VAT assessments and adjustments issued by HMRC are upheld.