Latest news about VAT - 2025

1. Hippodrome Casino Ltd – Partial exemption special method

The Court of Appeal has recently released its judgement in the case of Hippodrome Casino Ltd, where the taxpayer argued unsuccessfully that a partial exemption special method based on floorspace was a more fair and reasonable input tax recovery calculation method than the standard turnover method. The Court of Appeal determined that the floorspace method did not create a more fair and reasonable VAT recovery, with the issue of large amounts of floorspace being for dual use being a key aspect of the judgement.

Practical focus: This case serves as a reminder that for a special method to be agreed, there must be clear evidence that it creates a more fair and reasonable recovery than the standard method, not just a better recovery rate. We recommend specialist advice is sought before a special method is considered.

2. Illuminate Skin Clinics Ltd – VAT exemption for medical care

In this case, Illuminate Skins Clinics Ltd argued that its supplies of skincare and wellness treatment met the exemption conditions to be treated as supplies of medical care. The Upper Tribunal has granted its appeal and concluded the First Tier did not make errors of law in relation to the principal purpose test or the implementation of the EU Principal VAT Directive. However, the Upper Tribunal referred the case back to the FTT as it determined its assessment of therapeutic purpose (diagnosis) had been too narrowly drawn.

Practical focus: This adds to the list of recent cosmetic vs medical care exemption cases, with the majority ending in favour of HMRC. This highlights the difficulty of arguing the medical care exemption conditions are met, especially where there are cosmetic benefits to the supplies.

3. VAT treatment of overage payments – HMRC guidance

HMRC have recently issued guidance which sets out their view on the correct VAT treatment of overage payments. These payments are made by the purchases of land/property after completion, typically to reflect an increase in the value of the land/property. HMRC’s view is that the VAT liability of these payments should generally be considered separately to the initial sale, and normally, the liability at the time of the payment (or VAT invoice) should be determined. There can be some scenarios, such as in relation to new commercial buildings, where this treatment does not apply.

Practical focus: This guidance gives clarity for taxpayers in the sector as to the VAT treatment of these overage payments. At the same time, it does present input tax recover risks to sellers as the VAT treatment of the overage payments may now differ from the VAT treatment of the original sale. Our land and property VAT experts are on hand to talk through any practical implications of HMRC’s updated guidance.

4. Telamara Limited – VAT liability of nitrous oxide for culinary use

Telamara Limited tried to argue that its supplies of nitrous oxide for culinary use could meet the conditions to be a zero-rated supply of food. To no real surprise, the First Tier Tribunal held that it must be standard rated.

Practical focus: The VAT treatment of potential items of food is something we see in the courts frequently, highlighting the complex and subjective nature of legislation and HMRC guidance. We recommend any taxpayers in the sector regularly review the VAT liability of its product to ensure ongoing compliance.

5. HMRC campaign on input tax recovery in relation to facilities management services

The Chartered Institute of Taxation has recently reported that HMRC have set about a campaign that alerts VAT registered businesses about potential input tax errors in relation to facilities management services. The issue that HMRC have found is that facilities management businesses do not always hold the contracts with the service suppliers and therefore may not be entitled to recovery as not being the true recipient of service.

Practical focus: We would strongly recommend that businesses in the sector review the contractual position of such services to ensure the VAT recovery conditions are met.

1. Arcomet Towercranes SRL – VAT on transfer pricing adjustments

The Court of Justice of the European Union (CJEU) has released its decision in the case of Arcomet Towercranes SRL. The case concerned whether transfer pricing adjustments under a transactional net margin method constituted a taxable supply of services or were outside the scope of VAT. The CJEU found in the circumstances of the case that the adjustment was consideration for a supply of services.

Practical focus: The interaction between transfer pricing and VAT (as well as intercompany arrangements more broadly) are a real hot topic at the moment in VAT across the EU. This is a complex area of VAT and can create risks especially if companies are not fully taxable. We would recommend all partly exempt groups review the VAT treatment applied to intercompany and transfer pricing arrangements in light of recent developments.

2. Isle of Wight NHS Trust – exemption applies to locum doctors

The taxpayer in this case received supplies of locum doctors. Those supplies were treated as standard-rated and the taxpayer suffered a VAT recovery restriction. Despite HMRC’s contention that these were standard-rated supplies of staff, the taxpayer successfully convinced the FTT that the healthcare exemption applied.

Practical focus: This is a really significant decision. It is contrary to HMRC’s current policy and large amounts of VAT are at stake. Any taxpayer which receives supplies of locum doctors which have been treated as subject to VAT should consider the options now. Our healthcare and public sector VAT experts can assist.

3. VAT652 can no longer be used to correct errors in VAT returns

HMRC has recently updated their guidance on the process when discovering errors in VAT returns, noting that the recommended approach is for this now to be completed online through the VAT registered businesses’ government gateway account. Where this cannot be used, taxpayers can still make error corrections in writing to HMRC, but not using the usual VAT652 form method.

Practical focus: This is a practical note for all VAT registered businesses on the updated approach to disclosing errors to HMRC. Any businesses identifying errors in their VAT returns should closely follow HMRC’s updated guidance.

4. Prudential Assurance Company Ltd - VAT groups and continuous supplies

In Prudential Assurance Company Ltd, the Supreme Court concluded that the tax point of “performance” payments made for services after a supplier left a VAT group was when those payments were issued or paid, despite the fact the services were actually carried out while it was part of the VAT group. Consequently, VAT should have been accounted for on the performance payment.

Practical focus: This case considered tax points and the impact they may have on VAT grouping arrangements. We would always recommend advice to be taken before making material changes to VAT groups, especially where future payments/services are expected.

5. Hotelbeds UK Limited – Evidence for input tax recovery judicial review

Hotelbeds made recharges of hotel rooms to tour operators, incurring VAT on the initial direct charge from the hotels. It had practical difficulties in obtaining VAT invoices from many hotels. This was a Judicial Review case which looked at whether HMRC applied its discretionary powers reasonably when disallowing input tax recovery in the absence of a VAT invoice. The application for judicial review was allowed, with the Judge noting that HMRC’s policy and guidance was arguably inconsistent and that there was no suggestion of fraud here and that alternative evidence for VAT recovery was available.

Practical focus: This is a very important decision which calls into question the clarity and consistency in HMRC’s current application of its discretion to allow alternative evidence for VAT recovery where a VAT invoice is not held. If you have incurred VAT on costs but are unable to obtain a supporting VAT invoice, then get in touch to discuss.

1. Ferrero UK Limited – Biscuits wholly or partially covered in chocolate

 It is understood that the First-tier Tribunal (FTT) has reached its decision in the case of Ferrero UK Limited. The case concerned whether Ferrero Nutella Biscuits were partially covered in chocolate and therefore standard rated, or not partially covered and therefore zero-rated. The FTT sided with the taxpayer and held that the biscuits were not partially covered in chocolate and ruled in favour of Ferrero UK. 

Practical focus: This case highlights the complexities that VAT legislation has created in determining the VAT rate on certain food products, with this being just another in the long line of VAT of food cases that have made their way through the courts. We strongly recommend businesses in the food sector regularly review the VAT treatment of their products and take advice where there is uncertainty. Our consumer VAT specialists can assist.

2. Derby College Group and Cornwall College – Grant funding is consideration for a supply

FTT decisions were released in the cases of Derby College Group and Cornwall College on whether grant funding by government agencies for the provision of education by Further Education colleges was consideration for an exempt supply of education or outside the scope of VAT. Unsurprisingly in both cases, the FTT allowed the taxpayers’ appeals and determined that the funding was consideration for a supply because it was bound by the previous Upper Tribunal decision in Colchester Institute Corporation.

Practical focus: HMRC has presumably taken these appeals to protect its position pending the next stage of litigation in Colchester Institute Corporation where HMRC has been granted permission to appeal to the Court of Appeal. In these cases, the taxpayers wanted their supplies to be exempt because of a quirk of the interaction of time limit and “Lennartz” rules. However, in general, there would be a significant downside to Further Education colleges providing exempt education because of the potential effect on VAT reliefs. Colleges should be monitoring developments closely and thinking about scenario planning in the event that the litigation forces a change in HMRC policy on grant-funded education. Our education experts would be happy to discuss further.

3. Motorplus Limited – Evidence for VAT recovery – Strike out denied

In Motorplus Limited a HMRC strike out application was denied, and the case can now proceed to a substantive hearing at the FTT. The case concerns HMRC’s denial of a VAT recovery claim by a customer who did not hold a VAT invoice. It appears that the supplier and customer disagreed as to whether the supply was subject to VAT; the contract between them was VAT inclusive.

Practical focus: This was not a decision on the substantive issue of whether HMRC should have allowed VAT recovery in the circumstances despite the absence of a VAT invoice. It is expected that this will now be settled in a further FTT hearing. This is an interesting and important question, which could have wider ramifications on the options for VAT recovery where there is disagreement over the liability of a supply.

4. United Carpets (Franchisor) Limited – Single or multiple supply

In the case of United Carpets (Franchisor) Limited, the FTT considered whether the sale of flooring materials and the provision of fitting services by a third-party fitter were two separate supplies. HMRC sought to argue that the taxpayer was effectively supplying carpets and a subcontracted fitting service, but the FTT has held that there were two separate supplies and that the self-employed fitters supplied their own fitting services as principals.

Practical focus: These kinds of agency arrangements involving larger businesses working with smaller traders operating under the VAT registration threshold frequently give rise to VAT disputes (for example, in the private hire sector). As well as the commercial realities, the contractual arrangements are integral. This is a reassuring decision for an industry which typically relies on this kind of model. We are well-positioned to review agency arrangements and advise on the VAT implications and risks.

5. Update to codes to claim EU preferences

There has been an update to the document codes used by UK importers to claim preference under the EU-UK Free Trade Agreement. Going forward, document codes U116, U117, and U118 should be used, as appropriate – though the previous codes (U110, U111, and U112) will still be accepted in the short term. 

Practical focus: In recent years, HMRC has placed greater emphasis on customs compliance. As a result, it’s important to ensure that customs documentation is submitted accurately, in this instance reflecting the changes outlined above, to ensure the correct amount of customs duty is paid and to help goods enter free circulation in the UK efficiently. More broadly, this may also be a timely opportunity for UK importers to review the underlying basis on which EU preference is being claimed, as this is an area of increasing HMRC challenge.

1. H Ripley & Co Limited – Export evidence to support zero-rating

The Upper Tribunal has reached its decision in the case of H Ripley & Co Limited concerning whether sufficient export evidence was held to support the zero-rating of exported goods. The Upper Tribunal found in favour of HMRC and noted that the central issue was not whether the goods were actually removed from the UK, but whether there was sufficient evidence in respect of each specific transaction.

Practical focus: This highlights the importance of exporters holding sufficient evidence on file to prove goods leaving the UK for each and every zero-rated transaction. It is also a reminder of the strict time limit rules for zero-rating exports. Businesses making a large value of exports and not staying on top of this may be opening themselves up to very significant VAT exposure, as without adequate evidence, the standard rate of VAT will often apply. We strongly recommend that processes are reviewed to ensure sufficient evidence for zero-rating is held and that controls are robust. Our international VAT specialists can assist.

2. Högkullen AB: VAT, transfer pricing and intra-group charges

The Court of Justice of the European Union (CJEU) released its Judgment in Högkullen AB. Broadly, a holding company recharged various of its costs onto partly exempt subsidiaries on a cost-plus basis. Other costs were not recharged and regarded as shareholder costs. The central question for the CJEU was whether the holding company was making a single composite supply of intercompany support services or multiple supplies of individual elements such as IT, real estate and HR. This would potentially have a knock-on effect on special connected party valuation rules and therefore the overall level of irrecoverable VAT. The CJEU ultimately concluded there were multiple supplies, implying that the cost-plus valuation of the recharged costs might be adequate for VAT purposes.

Practical focus: Intercompany services and agreements are firmly in the VAT headlines at the moment and this is an important and developing area to monitor and revisit. The conclusion on the single and multiple supplies point is notable for its contrast with the recent Upper Tribunal decision in JP Morgan, which found there was a single supply in relation to similar (but not identical) cost recharge arrangements. We can work with businesses to review their intercompany arrangements to ensure that VAT has been adequately considered in light of the complex and evolving case law landscape.

3. HMRC release the Customs Valuation technical handbook

HMRC has recently published a technical handbook with additional guidance on using the valuation methods for establishing import values for import VAT and customs duty. The handbook builds on previous HMRC guidance and will be a good tool for importers to establish fair and reasonable customs values using the methods written into legislation.

Practical focus: We suggest that businesses importing into the UK review the new valuation handbook to gain assurance that they are using the correct method and calculating their import values correctly. Where there is uncertainty, our customs experts are available to talk through any queries.

4. Legislation day and tax avoidance promoter powers

The 21 July was “legislation day”. This is a day on which a significant amount of draft tax legislation to be included in the next Finance Bill is published. Whilst there were few in the way of VAT-specific announcements, there are measures designed to target “promoters of tax avoidance”. These include a proposed criminal offence for a failure to report “tax avoidance arrangements” falling within the indirect tax disclosure regime known as DASVOIT.

Practical focus:  In recent years, HMRC has been widening and strengthening powers to target marketed tax avoidance. This is a further step in this direction, which could leave advisers in criminal hot water if they do not disclose. At the margin, there can be complex and nuanced decisions around whether some tax/VAT planning arrangements trigger DASVOIT obligations and this is an area that taxpayers and advisers must be increasingly alive to.

5. HMRC updates guidance on voluntary registration

HMRC has updated parts of its VAT Notice on VAT registration to “support customers in selecting the correct Effective Date of Registration”.

Practical focus:  Whilst we understand there has been no substantive policy change in this area by HMRC, it is a useful reminder of the importance of weighing up the pros and cons of voluntary VAT registration. In particular, businesses not yet making taxable sales but who are incurring significant VAT on costs should consider their VAT position early to ensure that the right decisions are being made from a VAT (and cash flow) perspective.

1. JP Morgan Chase Bank NA – VAT liability of intra group services

The Upper Tribunal has reached its decision in the case of JP Morgan Chase Bank NA. This is an important decision about VAT and intercompany services and the Upper Tribunal has confirmed the FTT’s finding that the services provided were a composite taxable supply. The Upper Tribunal also considered whether there would be scope for an exemption for some of the intragroup services if it had concluded that some of the taxpayer’s services were supplied separately for VAT purposes. It concluded that the conditions for exemption would not be met.

Practical focus:  This is a very important decision to scrutinise for corporate groups making recharges and providing services between branches and corporate entities. It is particularly important for global partly exempt groups such as those in the financial services sector. However, its importance is much wider than the financial services sector alone. One of the points it highlights is the need to consider VAT as a priority in relation to intercompany arrangements/agreements. It also provides useful insights on the perennial issue of single and multiple supplies. We recommend you review your intercompany arrangements in light of this decision. 

2. HMRC issue brief on the VAT treatment of charity fundraising events

Following the Yorkshire Agricultural Society case earlier this year, taxpayers had been waiting for clarity from HMRC on their stance on the VAT fundraising exemption and the requirement in UK law that an event must be promoted primarily for the raising of money. The Revenue & Customs Brief, issued on 13 June 2025, clarifies that HMRC accepts that sometimes an event may have more than one primary purpose and where these cannot be separated exemption can apply.

Practical focus: Charities organising fundraising events should consider whether confirmation of HMRC’s stance may provide opportunities to treat related income as exempt from VAT and take advice where there is uncertainty. HMRC appears to be taking a very restrictive approach to the Upper Tribunal’s decision and attempting to narrow its scope as far as possible. Further arguments as to whether the promotion condition is necessary at all may follow. Our charity VAT experts can discuss further.

3. Performance Leads Limited – Scope of exemption for intermediary services

The First-Tier tribunal released its decision on Performance Leads Limited that websites that connected independent financial advisors (“IFAs”) to those seeking financial services met the conditions to be an exempt intermediary service. Although there was no detailed consideration of the underlying supply, the FTT found that the bringing together of the individuals with the IFAs could be a VAT exempt intermediary service.

Practical focus: This is the latest case on “lead generation” services and the financial services intermediaries exemption. A number of cases have also considered the liability of similar services, including in the context of the insurance intermediaries exemption. The decision appears generous to the taxpayer and there is a chance it may be appealed. However, it is worth considering by any business operating in the highly complex background of these exemptions. In addition, IFAs themselves should ensure that they have considered the VAT liability of their services; some IFAs operate on the assumption that all of their services are exempt from VAT, but this is not necessarily the case.

4. Updated guidance on pre-registration input tax for private schools

HMRC has updated its guidance on pre-registration input tax opportunities for newly registered private schools to include an example of a service cost incurred prior to registration that has taxable use post 1 January 2025. The example suggests that the economic life of the cost should be used and apportioned appropriately for pre and post registration taxable activities.

Practical focus: Where HMRC were previously silent on the potential for pre-registration VAT recovery on service costs for private schools, this update gives taxpayers confidence that VAT recovery opportunities may be available in respect of services and a common-sense approach to follow. We expect most private schools to now be VAT registered and have submitted their first VAT returns. However, even if returns have been submitted, it may be worth revisiting pre-registration input tax claims to ensure that VAT recovery opportunities have been maximised. Attention should also be turned to the capital goods scheme calculations.

5. HMRC policy change on VAT recovery on pension fund management

On 18 June 2025, HMRC issued a Revenue & Customs Brief providing an update of its view on the availability of VAT recovery on costs related to the management of defined benefit pension funds. HMRC policy was previously that there was dual use of investment costs by employers and the pension funds trustees, with an apportionment required. HMRC’s updated stance is that all costs will be seen as the employer’s and therefore allowable for VAT recovery, subject to normal deduction rules.

Practical focus: Employers with employee pension funds should urgently review their VAT recovery position. There may be opportunities for taxpayers to make VAT recovery claims for the last four years where HMRC’s previous policy had been implemented so taxpayers should act quickly to ensure the recovery opportunity is maximised both for the past and going forward.

1. Get a Drip Ltd – IV Drips deemed within the scope of medical care exemption

The First-Tier tribunal released its decision on Get a Drip Ltd, holding that IV drips and vitamin injections provided by the taxpayer were within the VAT exemption for medical care. The basis for the decision leant on the fact that these were treatments for medical conditions that were diagnosed by medical professionals. The FTT agreed with the taxpayer that there was no “requirement of severity” or “moral judgement” that a condition needed to meet to fall within the medical exemption. A self-inflicted hangover headache could seemingly therefore, still qualify as a medical condition for VAT purposes! 

Practical focus: We have seen many recent cases which try to argue that their supplies are within the scope of the medical exemption fail, particularly in relation to “cosmetic” type treatments. The proliferation of “wellness”, “longevity” and similar services in the medical space also poses difficult questions around VAT liability.   Any taxpayers operating in this space should carefully consider the VAT liability implications of their activities.

2. Align Technology – Dental aligners are dental prostheses

 In Align Technology, the First-tier tribunal found that dental aligners supplied by the taxpayer constituted dental prostheses for the purposes of the VAT exemption for health and welfare. Therefore, they qualified for VAT exemption.

Practical focus: Similar to Get a Drip, this case illustrates the difficulties taxpayers find in arguing with HMRC that their supplies fall under the VAT exemption for health and welfare. On the specific point around aligners (and other orthodontic appliances,) dental practices/professionals should take advice and consider whether there is scope to submit protective claims where they have supplied aligners or similar appliances and charged VAT at 20%. 

3. NHS Ayrshire & Arran Health Board - Zero-rating of construction costs

The First-tier tribunal found that construction services in relation to a bedroom wing of a new inpatient building did not meet the relevant residential purpose conditions to be treated as zero-rated, as a result of a specific exclusion for hospitals and similar institutions, and the bedroom wing being an integral and inextricable part of the wider inpatient building.

Practical focus: This case highlights the complexity of meeting the conditions for zero-rating of construction services. Any taxpayers incurring material amounts of construction costs should consider taking VAT advice in respect of whether any reliefs could be available. The case is especially relevant for suppliers and recipients of construction services in relation to premises that contain both residential areas and areas that are used for medical treatment. Our real estate VAT specialists can assist.

4. HMRC extend the time limit for payment of the final VAT return

Currently, when a business ceases to be liable or entitled to be VAT registered, it is required to submit and pay the final VAT return within one month and seven days. However, due to HMRC delays in processing de-registrations this deadline can sometimes come before HMRC issues the final VAT return. The VAT regulations have been updated to allow HMRC to extend this deadline.

Practical focus: This is a positive bit of potential administrative flexibility for taxpayers required to deregister from VAT that is practically necessary because of HMRC systems constraints. If you have been issued penalties due to the late submission of a final VAT return and would like to discuss, please get in touch.

5. CJEU case on compensation paid by a local authority

In the CJEU case of Dyrektor Krajowej Informacji Skarbowej, a public transport operator received income in the form of ticket sales (at a price determined by a local authority) and “compensation” from the local authority to cover losses incurred in providing the transport services. The question arose as to whether this compensation was further consideration for a taxable supply. The CJEU sided with the taxpayer and deemed the compensation payments should not be included within the value of taxable supplies made by the transport operator.

Practical focus: Determining whether grants, subsidies, compensation and other similar kinds of payments constitute consideration for a taxable supply is an inherently complex area of VAT and regularly returns to the tribunals and courts. In broad terms, a payment is only consideration for a supply when there is a direct link with something which is supplied in return. This issue crops up in many contexts for a variety of businesses and organisations. If in any doubt over the VAT status of a significant income stream, it is worth a conversation with a VAT adviser to discuss. In our experience, the amounts involved can be very material.

1. VAT Reverse Charge for Building and Construction Services Manual – newly published

On 2 April 2025, HMRC published an entirely new domestic reverse charge internal manual. The content of the manual covers the scope of the reverse charge, how it works and regular compliance issues.

Practical focus: This is the most detailed guidance we have seen to date from HMRC on the reverse charge for construction services, and for that reason, it is a welcome development. In this context, it makes sense for businesses which are (or potentially may be) affected by the domestic reverse charge to review their current approach in light of this guidance (and the wider legislative landscape). Our real estate VAT team can support.

2. Arcomet Towercranes SRL – VAT and transfer pricing

In Arcomet Towercranes SRL, the Advocate General of the CJEU suggested that a transfer pricing adjustment under the Transactional Net Margin Method (TNMM) was, in the specific circumstances, considered a supply for VAT purposes. The Advocate General also indicated that whether a transfer pricing adjustment should be subject to VAT should always be determined on a case-by-case basis.

Practical focus: This is a very important case to monitor for groups making transfer pricing adjustments. We await the Judgment of the main court, but if it follows the Advocate General, it could mark a shift in the accepted wisdom on VAT and transfer pricing adjustments (which are already a complex area). It is therefore a good time to start thinking about reviewing the VAT implications of your transfer pricing policies. 

3. HMRC issues a brief to target VAT avoidance in the care industry

On 24 April 2025, HMRC issued Revenue and Customs Brief 2 (2025) relating to VAT planning arrangements in the care industry. The planning often involves inserting a VAT-grouped unregulated entity into the supply chain between the state-regulated provider and the commissioning body (e.g. a local authority).  HMRC have confirmed it deems this kind of planning to be a form of tax avoidance and is launching a programme to review new grouping applications and challenge existing structures.

Practical focus: This form of planning has been and continues to be fairly widespread. This is the first time that HMRC have publicly indicated that they disagree with the structuring on avoidance grounds. Taxpayers who have implemented these kinds of VAT grouping structures should seek professional advice now to determine the best way of managing the situation with HMRC.

4. WTGIL Ltd – Scope of VAT exemption for insurance intermediary services

In the case of WTGIL Ltd, the Court of Appeal ruled that VAT exemption applied to the provision and fitting out of black box devices in cars by an insurance intermediary to monitor the insurance policyholders’ driving. The Court decided that the provision and fitting of these devices was an integral and essential feature of this kind of motor insurance, and therefore the services were not only related to, but were an indispensable element of, or precondition to, the main transaction of insurance itself.

Practical focus: It is always important to take note of Court of Appeal Judgments, and there are some interesting technical points to dissect about the scope of VAT exemption for insurance intermediary services, which are worth close consideration and could have read-through beyond this narrow example. For example, the Court rejected the idea that the fact the black box was installed after the insurance contract had been concluded meant that the services could not be covered by the intermediary exemption.

5. JD Wetherspoon PLC - Is Cider an alcoholic drink for VAT purposes?

In answer to the above question, yes. The recent First Tier Tribunal (“FTT”) case of JD Wetherspoon answered what you would have thought was a quite straightforward question. The taxpayer argued that cider was not excluded from the reduced rating during COVID for hospitality as an alcoholic drink. The FTT ruled in favour of HMRC, but the issue was not as straight forward as it might first appear because of an apparent error in the statutory drafting.

Practical focus: As ever in VAT, a simple question was not as simple as it seemed. The FTT’s decision ran to some 70 pages. An error in statutory drafting meant that the taxpayer’s case was not as implausible as it might sound. We await to see if the decision is appealed, but if you sold cider during this period, you may wish to review your position to see if there is any scope to make a protective claim in case there is a successful appeal. Some periods will already be “time-barred”.

1. Hastings Insurance Service - Potential VAT reclaim opportunity for the Insurance Sector

The First-tier Tribunal (FTT) in Hastings Insurance Services has created a potential opportunity for some in the insurance sector to make claims for under-recovered input tax. In brief, the Tribunal decided that an anti-avoidance provision introduced to limit VAT recovery for insurance intermediary services rules went further than was permitted under EU law and was therefore invalid.

In practice: The decision has application for transactions at least up to the end of 2023, and the opportunity may arise where a UK business (e.g. a service company) has provided insurance intermediary services to a non-EU customer (e.g. an insurer); and the party to be insured is in the UK.

2. Innovative Bites - Court of Appeal narrows scope for zero-rating sweetened food

The Court of Appeal returned its Judgment in Innovative Bites Limited, better known as “that case about big marshmallows(!)”. The Upper Tribunal had previously decided that the marshmallows were not confectionery and could be zero-rated. HMRC's appeal against this interpretation was successful, and the case must be heard again by the FTT.

In practice: The Court of Appeal's interpretation of the VAT legislation is more restrictive than the Upper Tribunal, and it will be more difficult to zero-rate sweetened food products that are on the borderline of “confectionery”.

3. When can you rely on a previous HMRC decision?

In 2024, Queenscourt Limited lost its case at the FTT concerning dip pots and whether they formed part of a single supply of takeaway food. The taxpayer has now been granted permission to argue “legitimate expectation”. This argument concerns HMRC's row back on a previous decision to repay VAT.

In practice: When HMRC goes back on something they have previously implied, said or done, it can be a minefield to negotiate your options. A key point to note is that just because HMRC has previously conducted a compliance review, it doesn’t mean they have “signed off” on your VAT affairs.

4. VAT in the Digital Age (“ViDA”) adoption

On 11 March 2025, the Council of the European Union adopted the VAT in the Digital Age (ViDA) package of measures. The ViDA package will be progressively rolled out until January 2035. Key dates include the extension of the single VAT registration in July 2028, the mandatory launch of measures for the platform economy in January 2030 and digital reporting and e-invoicing requirements in July 2030.

In practice:Whilst the rules are to be phased in over the medium term, businesses should consider the likely implications of the announcement and how they will affect existing processes and systems requirements. Whilst these are EU measures, UK businesses should stay updated on the UK’s ongoing e-invoicing consultation, which runs until May.

5. Bolt - Upper Tribunal upholds decision that on-demand private hire is subject to margin scheme

The Upper Tribunal has upheld the First-tier Tribunal’s decision that Bolt’s on-demand private hire vehicle service fell within the Tour Operator’s Margin Scheme (TOMS). Consequently, VAT was due (broadly) on the profit margin achieved rather than the full amount paid by its customers.

In practice: This is a very important decision for the private hire sector. It is also an important decision clarifying the application of the TOMS more broadly. Amongst other points, it confirms that the TOMS can apply to businesses that are not typical “tour operators”.  If your business buys in and resupplies travel and/or accommodation (even if it is not a central part of your activities) you should have thought about the TOMS.