The case concerned whether Zipvit, a trader selling vitamins and minerals by mail order, is entitled when accounting for VAT on its sales to make deductions of input VAT (the tax paid by the trader on goods and services purchased in connection with its business, as opposed to output VAT, which is the tax charged to the consumer by the trader on its goods or services) in respect of the price of postal services supplied to it by Royal Mail.
Zipvit claimed that under the Principal VAT Directive (2006/112/EC), article 168(a) it is entitled to deduct as input VAT the VAT due in respect of supplies or a VAT element deemed by law to be included in the price paid to Royal Mail for each supply. HMRC contended that on the proper interpretation of the Directive: (a) there was no VAT due or paid for the purposes of the Directive; and/or (b) since Zipvit at no point held invoices which showed that VAT was due and its amount, in compliance with the Directive, article 226(9) and (10) Zipvit is not entitled to recover input tax.
The Supreme Court unanimously decided that the legal position under the Directive is not clear. It held that it is common ground that at this stage in the process of the UK’s withdrawal from the EU, in a case involving an issue of EU law which is unclear, the Supreme Court is obliged to refer that issue to the CJEU to obtain its advice on the point. Therefore, the Supreme Court made an order for a reference and set out the questions for the CJEU.
Eleni Mitrophanous QC was involved in this case