Tribunal decides that supplies of military equipment to Poland and Greece are not zero-rated

13 Nov 2014

The First-tier Tribunal has dismissed an appeal by Goodrich relating to sales of military reconnaissance equipment to the US Government for onward sale to the Governments of Greece and Portugal under the umbrella of the Foreign Military Sales (“FMS”) programme of the US Government.

Goodrich argued that the sales were made under arrangements which amounted to an “international collaboration arrangement” for a “joint project of research, development or production”, which was therefore zero-rated under Schedule 8, Group 13, Item 2 and Note 1 VATA.

The Tribunal rejected this argument, upholding the submissions made by HMRC that, although the sales were to NATO members, NATO was not itself an “international collaboration arrangement” in relation to joint projects of research, development or production. Nor was the US Government’s FMS programme such a joint project, as it was a unilateral scheme established by the US Government as a framework for the sale of military equipment to friendly governments. Furthermore, the FMS programme involved no collaboration in a joint programme of research, development or production – it was simply a procurement programme – and it involved no provision for participating governments to relieve the cost of the project from taxation. On that basis, the supplies fell to be standard rated.

Please click to view the full Goodrich Corporation v HMRC judgment.

Raymond Hill represented HMRC