Y4 Express Limited v HMRC [2022]

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In Y4 Express Limited v HMRC [2022], the tribunal gives its pronouncement that appellant company (Y4), would not be able to recover input VAT paid on printing postage Impressions (PPI) at preferential rate.

Fact of the case

Y4 incorporated on 27 May 2010, and it is in business of arranging importation of goods from companies based in China and Hongkong. Its business involved collecting goods from the airport, storing them if required and arranging delivery of goods to final customers.
Y4’s business requirement is to use services of delivery companies including Royal Mail (RM) and it uses RM’s PPI services at preferential rates.
RM discovered that Y4’s declaration is not accurate, hence it had suspended its account.
In order to retain the benefits of preferential rates, Y4 entered into the verbal agreements with Mr. Pat Ning Man (Mr. Man) and M/s Colemead Limited and asked both the parties to open accounts with preferential rates benefits with RM.
Y4 prepares itself self-billing invoices on behalf of Mr. Man and M/s Colemead and sought to claim input VAT paid in their settlement.
In this case, arrangements were made, where RM issued invoices to Mr. Man and M/s Colemead and consideration paid by these parties from its own bank accounts and later on, Y4 paid same amount to both the respective parties as paid by them to RM.
HMRC disallowed the input VAT recovered by Y4, and thereafter, Y4 moves to First-tier Tribunal (FTT)

FTT taken a view that

The arrangements with Mr. Man and M/s Colemead Limited were not sufficient to establish the transaction as supply of goods or services as there was no economic activity was performed.
Y4 had not received taxable supplies from Mr. Man and M/s Colemead limited related with delivery services i.e., Y4 itself was not the party to the transaction with RM.
Based upon above facts, FTT upheld the decision of HMRC.
Appellant further moved to Upper Tribunal.

Upper Tribunal also upheld the decision of FTT and forms its opinion based upon below observation:

Y4 could not establish that supplies were made for consideration.
It based its opinion by referring to the case of Wakefield College where it had described that the supply of goods or services was necessary ingredient of an economic activity. FTT concluded that neither Mr. Man nor M/s Colemead Limited were supplying services for consideration.
Also Y4 could not able to recover input VAT, as the services by RM were contracted to be supplier to Mr. Man and M/s Colemead but not to Y4, as they were the contracting parties. RM under no circumstances could recover its payment from Y4 even if Y4 was the actual recipient of the services.

Based upon above reasoning, Y4 could not able to recover input VAT.

Source: $ (publishing.service.gov.uk)