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01 September 2015
E-cigarettes; Property planning; Two hats; Upstairs, downstairs
E-cigarettes
Has a retailer been correct by applying the reduced rate of VAT to e-cigarettes?
My client supplies electronic cigarettes and e-liquids (“the products”). In 2010 HMRC advised by phone that the products qualified for the reduced rate. An officer with 40 years’ experience of VAT agreed this at an enquiry in 2013.
My client has been the subject of another enquiry. The officer disagreed with the use of the reduced rate and assessed under-declared output VAT for the past four years – a substantial sum. The officer argued that HMRC had always considered the products to be standard rated as they were not smoking cessation products. Further the Principal VAT Directive Article 98 states that member states may apply a reduced rate to “pharmaceutical products” only.
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