Court of Appeal rejects Zipvit’s claim for ‘embedded’ VAT

CA rejects Zipvit’s claim for ‘embedded’ VAT. This appeal raises important questions of principle in the law of VAT. Zipvit used the services of Royal Mail at a time when it was understood that these services were exempt from VAT. The CJEU subsequently decided in Case C-353/07 TNT that the relevant supplies were in fact taxable. Zipvit sought a VAT repayment from HMRC on the basis that it followed from the TNT decision that supplies made to it by Royal Mail must always have included VAT in the price paid by Zipvit even though at the time of the supply both parties to the transaction considered the supply to be exempt from VAT and Zipvit did not hold an invoice showing it had been charged VAT. Zipvit’s claim was rejected by the CA. This was a lead case in wider litigation in which the CA noted that tax of around £1 billion was likely to be at stake. Eleni Mitrophanous involved.