Interpretation of VAT and excise law from 1 January 2024
Published 15 April 2024
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This publication is available at https://www.gov.uk/government/publications/revenue-and-customs-brief-4-2024-interpretation-of-vat-and-excise-law-from-1-january-2024/interpretation-of-vat-and-excise-law-from-1-january-2024
Purpose of this brief
This brief explains how VAT and excise legislation should be interpreted in light of:
- the Retained EU Law (Revocation and Reform) Act 2023
- the bespoke solution introduced for VAT and excise in Finance Act 2024
Both came into effect on 1 January 2024. In short, UK VAT and excise legislation means the same as it did on 31 December 2023.
Who needs to read this
All VAT registered businesses and advisers.
Background
The Retained EU Law (Revocation and Reform) Act removes the supremacy of EU law. However, to make sure there’s stability, it was made clear when it was introduced, that a bespoke solution would be introduced for the VAT and excise regimes. The bespoke solution, section 28, Finance Act 2024, outlines how VAT and excise legislation should be interpreted in light of the Retained EU Law (Revocation and Reform) Act.
Both the Retained EU Law (Revocation and Reform) Act and the bespoke solution took effect on 1 January 2024.
HMRC policy for VAT and excise is unchanged. Section 28, Finance Act 2024 means that UK VAT and excise legislation will continue to be interpreted in the same way as it was before 1 January 2024. Drawing on rights and principles that have always applied for interpreting UK law, including the principle of abuse. This means, principle of consistent interpretation (sometimes known as the ‘Marleasing’ principle) continues to apply in interpreting VAT and excise legislation.
However, businesses will no longer be able to rely on the ‘direct effect’ of EU law. It will no longer be possible for any part of UK legislation to be quashed or disapplied on the basis that it’s incompatible with EU law, as UK law is now supreme. This does not lead to any changes in HMRC policy.
We’ve engaged with those sectors potentially affected by the removal of direct effect of EU law. We’re satisfied that where businesses have before been able to rely on direct effect there are no adverse results. For example, fund management and financial intermediation, where there are generally corresponding domestic provisions that give the same treatment.
We’ll update specific guidance, including the online financial services guidance, as necessary, where further clarity is needed.
The amendments to the European Union (Withdrawal) Act 2018 made by section 6 of the Retained EU Law (Revocation and Reform) Act 2023 will apply to VAT and excise legislation as they do more generally. This includes the rules that the courts must apply in interpreting legislation, including the application of case law.
Effective date
The legislation took effect from 1 January 2024.
More information
This legislation maintains the stability of the VAT and excise regimes and means that UK VAT and excise legislation continues to be interpreted in the same way now as it was on 31 December 2023. HMRC policy remains unchanged.
Find out more about VAT and excise in the VAT: detailed information guide.