26 February 2021
Only the person to whom a supply is made, for use in the furtherance of their taxable business, can make a valid input tax claim. This is a fundamental principle. It overrides the question of who may have paid for the supply. It also overrides the question of who may hold the relevant invoice or other evidence where the representative or agent makes payments on behalf of the principal.
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When we refer to the owner as having ownership of the goods, this needs to be seen specifically in the VAT context of ownership being ‘the right to dispose of goods as owner’. It is accepted that, as long as the contract of ownership envisages that title will pass at some future date (usually on payment), title does not need to have passed at that earlier point. Typically, contractual arrangements will often allow the ‘owner’ to use and dispose of the goods as they see fit.
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An agent may be given power to act on their client’s behalf. They can then enter into contracts with third parties, receiving and issuing invoices in their own name.
Where an agent acts in line with section 47 of the VATA, the agent is treated as importing and supplying the goods as principal.
In these circumstances the agent can reclaim the import VAT as input tax, subject to the normal rules, but must treat the transactions as a supply by them and charge and account for VAT on the onward sale in the normal way.
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The importation of the leased goods and the onward lease are 2 separate taxable events for VAT purposes. When the goods are imported into the UK the overseas supplier incurs the import VAT in respect of its separate onward supply of a leased good.
The person leasing the goods does not take ownership of the leased goods and does not have entitlement to recover the import VAT. They take on the leased good and any input tax incurred in respect of the lease itself would be recoverable. It would be subject to the normal rules, as it relates to the separate onward supply that they receive.
Source: gov.uk
