Could Spanish business reclaim UK VAT on imported food?

The taxpayer which was established in Spain imported goods into the UK from outside the EU in September 2018 – this was a one-off shipment. They arrived in Tilbury from South America and were shipped out to its premises in Spain within two days of their arrival. None of the goods were sold in the UK.

The taxpayer submitted a VAT refund claim to HMRC to recover the import VAT. HMRC rejected it on the basis that the company had made taxable sales in the UK and should have registered for VAT. The movement of goods from UK to Spain would have been a ‘deemed supply’ from its UK to Spanish registration – zero rated for UK VAT purposes but still taxable.

In its appeal the taxpayer said it was not doing business in the UK. It had chosen the particular transport route because it was the...