THE CHARTERED INSTITUTE OF TAXATION
ADVANCED TECHNICAL
Cross-Border Indirect Taxation
May 2021
TIME ALLOWED
3 HOURS 30 MINUTES
• All workings should be shown and made to the nearest month and pound unless the
question specifies otherwise.
• Candidates who answer any law elements in this paper in accordance with Scots law or
Northern Ireland law should indicate this where relevant.
• Scots Law candidates may provide answers referring to Land and Buildings Transaction
Tax rather than Stamp Duty Land Tax.
• Except as set out below or indicated by additional information in the question, you may
assume that 2020/21 legislation (including rates and allowances) continues to apply for
2021/22 and future years.
1) You MUST assume that the UK remains within the European Union.
2) You MUST ignore all temporary Covid related legislation including furlough, grants, loans
and the reductions in VAT and SDLT rates.
Except in relation to points 1) and 2) above, candidates answering by reference to more
recently enacted legislation or tax cases will not be penalised.
• You must type your answer in the space on the screen as indicated by the Exam4 guidance.
,1. Kitchener Ltd is a VAT registered UK established company which intends to purchase a
significant quantity of unsorted recyclable glass currently located in France. It will bring
80% of the glass to the UK to smelt to create new glass bottles, relying on transport
arranged by the French supplier. However, before it can use the recycled glass, it needs
to be sorted and graded. The options are:
1) Engage a sorter in France to perform this work and then ship the sorted product to
the UK.
2) Bring it to the UK and sort and grade it here.
Since Kitchener Ltd has agreed to buy more glass than it can reasonably use, it has
arranged to sell the remaining 20% of its unsorted glass to a buyer in Germany who will
be invoiced from the UK. That glass will be shipped directly to them from France very
soon after it has been purchased by Kitchener Ltd.
Label design and production
Kitchener Ltd’s in-house label design and production service is a profitable value-added
activity which it tries to sell to as many customers as possible who purchase bottles.
At present, the design and production elements of the labels is included within a single
price for labelled bottles and a higher price per unit is charged than for a supply of
unlabelled bottles.
A query has been raised by a non-EU established business customer to whom labelled
bottles have been exported in the past. They are looking at re-branding and have asked
whether Kitchener Ltd can supply a new design for their labels. In the future the customer
may source its bottles from a producer in its own country but may wish to retain Kitchener
Ltd to supply solely labels, provided it is happy with the design. If successful it is
anticipated that EU business customers will seek similar arrangments in the future.
Whilst Kitchener Ltd makes every effort to promote its in-house design team, some UK
and overseas customers have indicated that they may wish to use a third-party designer.
The customers may do this, but under the terms of contracts for the supply of labelled
bottles, they are obliged to appoint Kitchener Ltd as their agent to procure the third-party
designer. This clause would allow Kitchener Ltd to generate some “agency” income,
(although in practice it would invoice the client for the work including amounts it needs to
pass on to the third-party designers, who could be established in the UK or other parts
of the EU).
Requirement:
Explain the VAT implications of the range of proposed activities. (20)
Page 2 of 6 AT CBIT
,2. Globalgend Ltd is a UK established VAT registered business which supplies generators
for sale and lease and is to undertake the following activities:
Hire of Generators to Clients in Romania, Turkey and the Middle East
Globalgend Ltd is going to lease some generators to business clients in both Romania
and Turkey for six months from 1 January 2022.
After the contract with the Romanian client has ended, those generators will be returned
to the UK and then will be hired to a French based charity for use in humanitarian aid
operations in the Middle East. Globalgend Ltd will be handing over the generators to
them in Southampton docks before shipment. The Turkish generators will have minimal
value at the end of the lease and will be scrapped in Turkey.
Swiss Charity
From 1 March 2022 Globalgend Ltd will ship some generators to Sudan and will generate
electricity and sell it to a Swiss established charity performing irrigation projects. It has
just donated a new generator (cost £100,000) to the UK office of the Swiss charity. The
charity has arranged road transportation from Birmingham where it is currently stored to
Tilbury Docks, where it will be officially handed over to them. Globalgend Ltd has agreed
to pay for the transport as part of the donation. As the transportation invoice will be made
out to the charity, it is keen to know for budgetary purposes, whether the charity status
will have any bearing on the VAT liability of these services.
Whilst the charity will arrange the UK transport, Globalgend Ltd are more skilled at
arranging exports, and so have agreed to organise (and pay for) the export to Sudan on
the charity’s behalf. The invoice for this will be made out to Globalgend Ltd.
Globalgend Ltd has been financially supported by business partners established in the
US, Germany and the UK who will sponsor part of the cost of the generator in return for
which it will have their corporate names prominently displayed on it. Globalgend Ltd has
also purchased TV advertising coverage to gain maximum exposure of the handover to
the President of the Swiss charity at Tilbury Docks.
Requirement:
Discuss the VAT implications of the proposed projects, including any reporting
requirements. (20)
Page 3 of 6 AT CBIT
, 3. Insuranceworld plc, is a leading UK established insurance group which has decided to
conduct a review of three specific areas of its group activities.
Neckcrop Ltd
Neckcrop Ltd, a wholly owned subsidiary company, will act as underwriter for a specific
range of insurance policies to be offered to the UK horse riding community. The company
is established in Guernsey and will sell policies through a wholly owned VAT registered
UK subsidiary, Remindon Ltd, which will act as agent on behalf of Neckcrop Ltd.
Neckcrop Ltd has no staff or assets in the UK.
Remindon Ltd, has recently incurred input tax on advertising in preparation for the
supplies to be made to Neckcrop Ltd.
Dowsett Ltd
Dowsett Ltd is a UK established group member which sells public liability and marine
insurance. In June 2021 it is expected to conclude the sale of all of its 500 public liability
insurance contracts along with other assets to a related group company, Crodos Ltd,
which is established in Cyprus. It will continue to sell marine insurance.
Under the terms of this sale:
1) In addition to the contracts, the sale will include an office in the UK, some computer
equipment and the transfer of 20 employees.
2) Dowsett Ltd will provide existing customer details in return for payments and will
continue to receive a commission on renewed policies for five years following the
sale.
3) Dowsett Ltd must redirect any enquiries for public liability insurance from potential
customers to the buyer.
4) The buyer will market Dowsett Ltd branded marine policies.
5) Dowsett Ltd will include a link on its website to the buyer’s website so that any
customers can obtain details and connect to the buyer’s website to buy public
liability insurance.
Immediately following completion of the sale by Dowsett Ltd, for commercial reasons
Crodos Ltd will sell the insurance contracts and the other purchased assets and assign
the rights and obligations of the contracts on the same day to a third-party Luxembourg
established company, Bevos SARL.
Commission post completion
Dowsett Ltd will continue to receive a commission payable monthly on new and renewed
policies (initially as part of the terms of the transaction with Crodos Ltd but ultimately from
Bevos SARL), for five years following completion of the June 2021 transaction.
Dowsett is uncertain whether this commission would be seen as part of the original
transaction, or as separate supplies over the five-year period.
Requirement:
Explain the VAT treatment of the proposed transactions with reference to case law
where applicable. (15)
Page 4 of 6 AT CBIT
ADVANCED TECHNICAL
Cross-Border Indirect Taxation
May 2021
TIME ALLOWED
3 HOURS 30 MINUTES
• All workings should be shown and made to the nearest month and pound unless the
question specifies otherwise.
• Candidates who answer any law elements in this paper in accordance with Scots law or
Northern Ireland law should indicate this where relevant.
• Scots Law candidates may provide answers referring to Land and Buildings Transaction
Tax rather than Stamp Duty Land Tax.
• Except as set out below or indicated by additional information in the question, you may
assume that 2020/21 legislation (including rates and allowances) continues to apply for
2021/22 and future years.
1) You MUST assume that the UK remains within the European Union.
2) You MUST ignore all temporary Covid related legislation including furlough, grants, loans
and the reductions in VAT and SDLT rates.
Except in relation to points 1) and 2) above, candidates answering by reference to more
recently enacted legislation or tax cases will not be penalised.
• You must type your answer in the space on the screen as indicated by the Exam4 guidance.
,1. Kitchener Ltd is a VAT registered UK established company which intends to purchase a
significant quantity of unsorted recyclable glass currently located in France. It will bring
80% of the glass to the UK to smelt to create new glass bottles, relying on transport
arranged by the French supplier. However, before it can use the recycled glass, it needs
to be sorted and graded. The options are:
1) Engage a sorter in France to perform this work and then ship the sorted product to
the UK.
2) Bring it to the UK and sort and grade it here.
Since Kitchener Ltd has agreed to buy more glass than it can reasonably use, it has
arranged to sell the remaining 20% of its unsorted glass to a buyer in Germany who will
be invoiced from the UK. That glass will be shipped directly to them from France very
soon after it has been purchased by Kitchener Ltd.
Label design and production
Kitchener Ltd’s in-house label design and production service is a profitable value-added
activity which it tries to sell to as many customers as possible who purchase bottles.
At present, the design and production elements of the labels is included within a single
price for labelled bottles and a higher price per unit is charged than for a supply of
unlabelled bottles.
A query has been raised by a non-EU established business customer to whom labelled
bottles have been exported in the past. They are looking at re-branding and have asked
whether Kitchener Ltd can supply a new design for their labels. In the future the customer
may source its bottles from a producer in its own country but may wish to retain Kitchener
Ltd to supply solely labels, provided it is happy with the design. If successful it is
anticipated that EU business customers will seek similar arrangments in the future.
Whilst Kitchener Ltd makes every effort to promote its in-house design team, some UK
and overseas customers have indicated that they may wish to use a third-party designer.
The customers may do this, but under the terms of contracts for the supply of labelled
bottles, they are obliged to appoint Kitchener Ltd as their agent to procure the third-party
designer. This clause would allow Kitchener Ltd to generate some “agency” income,
(although in practice it would invoice the client for the work including amounts it needs to
pass on to the third-party designers, who could be established in the UK or other parts
of the EU).
Requirement:
Explain the VAT implications of the range of proposed activities. (20)
Page 2 of 6 AT CBIT
,2. Globalgend Ltd is a UK established VAT registered business which supplies generators
for sale and lease and is to undertake the following activities:
Hire of Generators to Clients in Romania, Turkey and the Middle East
Globalgend Ltd is going to lease some generators to business clients in both Romania
and Turkey for six months from 1 January 2022.
After the contract with the Romanian client has ended, those generators will be returned
to the UK and then will be hired to a French based charity for use in humanitarian aid
operations in the Middle East. Globalgend Ltd will be handing over the generators to
them in Southampton docks before shipment. The Turkish generators will have minimal
value at the end of the lease and will be scrapped in Turkey.
Swiss Charity
From 1 March 2022 Globalgend Ltd will ship some generators to Sudan and will generate
electricity and sell it to a Swiss established charity performing irrigation projects. It has
just donated a new generator (cost £100,000) to the UK office of the Swiss charity. The
charity has arranged road transportation from Birmingham where it is currently stored to
Tilbury Docks, where it will be officially handed over to them. Globalgend Ltd has agreed
to pay for the transport as part of the donation. As the transportation invoice will be made
out to the charity, it is keen to know for budgetary purposes, whether the charity status
will have any bearing on the VAT liability of these services.
Whilst the charity will arrange the UK transport, Globalgend Ltd are more skilled at
arranging exports, and so have agreed to organise (and pay for) the export to Sudan on
the charity’s behalf. The invoice for this will be made out to Globalgend Ltd.
Globalgend Ltd has been financially supported by business partners established in the
US, Germany and the UK who will sponsor part of the cost of the generator in return for
which it will have their corporate names prominently displayed on it. Globalgend Ltd has
also purchased TV advertising coverage to gain maximum exposure of the handover to
the President of the Swiss charity at Tilbury Docks.
Requirement:
Discuss the VAT implications of the proposed projects, including any reporting
requirements. (20)
Page 3 of 6 AT CBIT
, 3. Insuranceworld plc, is a leading UK established insurance group which has decided to
conduct a review of three specific areas of its group activities.
Neckcrop Ltd
Neckcrop Ltd, a wholly owned subsidiary company, will act as underwriter for a specific
range of insurance policies to be offered to the UK horse riding community. The company
is established in Guernsey and will sell policies through a wholly owned VAT registered
UK subsidiary, Remindon Ltd, which will act as agent on behalf of Neckcrop Ltd.
Neckcrop Ltd has no staff or assets in the UK.
Remindon Ltd, has recently incurred input tax on advertising in preparation for the
supplies to be made to Neckcrop Ltd.
Dowsett Ltd
Dowsett Ltd is a UK established group member which sells public liability and marine
insurance. In June 2021 it is expected to conclude the sale of all of its 500 public liability
insurance contracts along with other assets to a related group company, Crodos Ltd,
which is established in Cyprus. It will continue to sell marine insurance.
Under the terms of this sale:
1) In addition to the contracts, the sale will include an office in the UK, some computer
equipment and the transfer of 20 employees.
2) Dowsett Ltd will provide existing customer details in return for payments and will
continue to receive a commission on renewed policies for five years following the
sale.
3) Dowsett Ltd must redirect any enquiries for public liability insurance from potential
customers to the buyer.
4) The buyer will market Dowsett Ltd branded marine policies.
5) Dowsett Ltd will include a link on its website to the buyer’s website so that any
customers can obtain details and connect to the buyer’s website to buy public
liability insurance.
Immediately following completion of the sale by Dowsett Ltd, for commercial reasons
Crodos Ltd will sell the insurance contracts and the other purchased assets and assign
the rights and obligations of the contracts on the same day to a third-party Luxembourg
established company, Bevos SARL.
Commission post completion
Dowsett Ltd will continue to receive a commission payable monthly on new and renewed
policies (initially as part of the terms of the transaction with Crodos Ltd but ultimately from
Bevos SARL), for five years following completion of the June 2021 transaction.
Dowsett is uncertain whether this commission would be seen as part of the original
transaction, or as separate supplies over the five-year period.
Requirement:
Explain the VAT treatment of the proposed transactions with reference to case law
where applicable. (15)
Page 4 of 6 AT CBIT
