Commentary

V3.163 Value—supplies to unregistered persons for retail sale

Part V3 Supplies, acquisitions and imports

V3.163 Value—supplies to unregistered persons for retail sale

V3.163 Value—supplies to unregistered persons for retail sale

Authority

The UK is authorised to derogate from Directive 2006/112/EC, art 731 in cases where a marketing structure based on the supply of goods through non-taxable persons results in non-taxation at the stage of final consumption. The UK is authorised to prescribe that the taxable amount for supplies to such persons is to be the open market value of the goods as determined at that stage2. In Traidcraft3, the appellant argued that HMRC, in making a direction, had offended the terms of the derogation on the basis that the original application for derogation referred to businesses which sold 'solely' to unregistered dealers. It therefore did not apply where a taxpayer sold goods to both registered and unregistered customers. The tribunal held, however, that the application for derogation was intended to apply to those whose business consisted either wholly or partly of sales to unregistered traders. The unguarded use, in an explanatory part of the application, of a single word should not be allowed to undermine that intention. A stronger challenge arose in Avon Cosmetics4, the well-known seller of cosmetics and other goods via a large number of (largely) unregistered representatives. The appellant claimed that, rather than simply levelling the playing field between itself and high street retailers, the derogation and its application in the UK had the effect of tilting the balance in favour of high street retailers, since there was no allowance for input tax recovery (principally in relation to demonstrator

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