Economic burden not borne

Input tax on taxable supplies treated as exempt

Zipvit supplied vitamins and minerals by mail order. It used Royal Mail for this and to distribute advertisements. Royal Mail and HMRC believed that the supplies made by Royal Mail were exempt.

In April 2009 the Court of Justice of the EU ruled in R (on the application of TNT Post UK Ltd) v CRC (Case C-357/07) [2009] STC 1438 that the postal exemption did not apply to individually negotiated supplies. As a result it was accepted that the services supplied by Royal Mail to Zipvit were taxable.

Zipvit then claimed the input tax on the supplies. This raised two questions. First whether VAT was ‘due or paid’ under the Principal VAT Directive Art 168(a) so as to entitle Zipvit to deduct input tax. Second whether the lack of invoices from Royal Mail put an end to Zipvit’s...