VAT and abuse of rights
Produced in partnership with Martin Shah and Gary Barnett of Simmons & Simmons LLP
VAT and abuse of rights

The following Tax practice note produced in partnership with Martin Shah and Gary Barnett of Simmons & Simmons LLP provides comprehensive and up to date legal information covering:

  • VAT and abuse of rights
  • EU law and Brexit
  • The Halifax case
  • Abuse of rights
  • VAT and abuse of rights
  • Consequences of abuse
  • Further Court of Justice decisions
  • Abuse of rights in practice
  • VAT deferral
  • Other cases
  • More...

This Practice Note is about the application of the EU principle of abuse of rights (or abuse of law) in the field of VAT. This is often referred to as the Halifax principle.

EU law and Brexit

VAT was, historically, a European tax, governed by EU law principles. This meant that any measures bearing on VAT avoidance had to arise from and be compatible with those principles. Accordingly, the UK’s domestic Ramsay principle has not generally been applied in the context of VAT. (For more information on Ramsay, see Practice Notes: Ramsay as a guide to statutory construction and Ramsay—reality and legal form.)

On exit day (31 January 2020), the UK ceased to be an EU Member State. There was then an implementation period (IP), during which the UK continued to be subject to EU law. The IP ended at 11pm on 31 December 2020 (IP completion day).

The European Union (Withdrawal) Act 2018 (EU(W)A 2018) captures EU-derived rights and legislation that are retained in UK law after IP completion day, while the Taxation (Cross-border Trade) Act 2018 contains specific provisions on the continuing relevance of EU law to the UK’s VAT rules. Section 42(4) expressly confirms that the Halifax principle continues to be relevant ‘in accordance with [EU(W)A 2018]’, even after IP completion day, for the purposes of VAT law.

The stipulation that the Halifax principle applies ‘in

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