The Court of Appeal has referred questions to the ECJ concerning the application of the abuse of rights principle to a VAT deferral scheme involving leasing arrangements: HMRC v Weald Leasing Ltd (Court of Appeal, 14 May 2009).  The questions referred seek guidance on whether deferral of VAT using a leasing structure involving an intermediate third partyis contrary to the purposes of the Sixth Directive and the relevance of references to "normal commercial operations" to the determination of that question. (As yet, there is no judgment, just the questions referred.)  The eventual decision of the ECJ should add useful jurisprudence to the growing body of law on the application of the abuse of rights principle to VAT situations.

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This case concerned the issue of whether the ‘Lennartz’ principle of upfront recovery could be applied to capital goods where there is mixed use. The AG’s Opinion in the case created some interest due to unofficial translations casting doubt on its application in such circumstances. However, the ECJ judgment has largely ignored the AG, finding that input tax incurred in making both taxable and non-taxable business supplies cannot be recovered in full. The Court made a clear distinction between this and Lennartz type cases where the mix is business and non-business (i.e., private use).

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The case relates to output VAT overpaid by a household name retailer on zero-rated teacakes, and looked at the taxpayer's rights under European Law to rely on domestic zero-rating, and HMRC's application of the unjust enrichment defence before May 2005.
HMRC had always considered that the Appellant’s chocolate covered teacakes were biscuits rather than cakes, and as such, were standard-rated. In 1994, HMRC accepted they had made an error, and that the teacakes were zero-rated. Following initial litigation, HMRC accepted the claim should not be time-barred, but insisted on only repaying 10% of the £3.5 million VAT repayment on 'unjust enrichment' grounds.

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The Chancellor of the Exchequer gave his Budget Speech on 22 April. The points affecting indirect taxes are set out below, together with the relevant Budget Note (BN) or other reference

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Revised VAT charges on fuel used for private motoring in business cars amended on or after 1 May 2009
The scale used to charge VAT on fuel used for private motoring in business cars will be amended from the start of the first VAT period beginning on or after 1 May 2009.
The revised charges are: