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HMRC internal manual

VAT Export and Removal of Goods from the UK

Conditions for zero rating: Court of Appeal case - Henry Moss of London Ltd

Henry Moss of London Ltd v Commissioners of Customs and Excise [1981] STC 139 is a frequently quoted Court of Appeal case where the Commissioners’ conditions for zero rating were found to be reasonable. A summary of the case is included below.

The company traded as clothing wholesalers, with substantial export sales. They failed to provide the evidence of export called for by Notice 703 in respect of a number of cases where they had treated goods as exported. The Commissioners issued assessments on the basis that the companies were required to account for output tax on such sales. The company appealed, contending that the relevant sales were made ‘over-the-counter’, the customers had claimed that the goods were for export, and they had handed the customers a form C273 as required by Notice 703 (October 1975 version) but had not received the forms back from the customers duly stamped with confirmation of export. (Form C273 was used by overseas traders or private persons when exporting goods in baggage or in accompanied vehicles to be produced to a Customs officer at the place of departure from the UK. This type of export is known as Merchandise in Baggage (MIB). The form currently used for MIB exports is a C88 Single Administrative Document. There is more information about the evidence of export available for MIB exports in Notice 703 Export of goods from the United Kingdom.)

The appeal was dismissed at tribunal and the Court of Appeal upheld the tribunal decision. Lord Denning observed that

“the Commissioners were entitled to impose very strict conditions for being satisfied. Unless there were strict conditions, VAT could be evaded very easily”. Accordingly, “it was necessary for the Commissioners to devise machinery to prevent people from getting out of paying VAT…the machinery is just about as good as could be devised to stop evasion”.

Templeman LJ observed that the trader

“could bring pressure to bear on the customer by requiring payment by the customer of the whole or part of the appropriate VAT as a deposit until the certificate [of export] is produced”.