A VAT update: Breaking down the latest developments
Key HMRC guidance, tribunal decisions, and opportunities for businesses to review their VAT position.
HMRC Updates
Care Homes
Are you a care provider and is your business part of a VAT group?
HMRC recently released a publication in respect of VAT arrangements used by care homes and care providers.
Andrew Hopkins, VAT Partner, recently wrote an article covering the details of the publication – this can be found here. If this change may impact your business, please read this article and get in touch with us for further information.
Fundraising Events
HMRC has updated its VAT guidance for charity and qualifying body fundraising events. Events with more than one primary purpose can now still qualify for VAT exemption if the fundraising is the core aim and promoted as such. Key notes from this update are:
- The exemption only covers standalone events (not regular trading).
- A charity or qualifying body is still limited to 15 events per location, per year.
- Where a fundraising event has more than one primary purpose, evidence must be retained to prove that the event was organised as a fundraising event.
Defined Benefit Pension Schemes
- If using defined benefit schemes in your business, what is your position on VAT recovery?
- HMRC recently released Revenue & Customs Brief 4 (2025) announcing a significant change in the way they view the eligibility for employers to recover VAT on the management of occupational pension funds.
- In short, HMRC will now permit the recovery of input VAT incurred by the employer on costs of investment advice/management which was previously blocked.
- This means, if you operate a defined benefit pension, you may be able to make a significant historic VAT reclaim on such costs and a prospective saving opportunity.
- However, as HMRC has not provided full clarification on this, caution should be taken when making any changes or submitting retrospective claims. HMRC is expected to provide further clarifications by Autumn 2025.
Court and Tribunal Updates
ZED-UK LTD & ANOR V HMRC
Zed-UK Ltd, a consumer electronics distributor, had claimed input tax on purchases from Digi C Associates Ltd. HMRC denied the request, alleging those transactions were part of a VAT fraud chain invoking the "Kittel" principle (established in Kittel [2009] UK CJEU). First-tier Tribunal (FTT) upheld HMRC’s decision to deny input VAT claims on the basis that Zed-UK’s transactions were connected to VAT fraud, under Kittel principle.
While the company did not have actual knowledge of the fraud, the Tribunal found it should have known about the fraudulent nature of the transactions. As a result, the VAT reclaim was disallowed, and a penalty under section 69C of the VAT Act 1994 was upheld. HMRC withdrew the personal liability notice issued to the company director during the proceeding.
What does this mean for me?
The tribunal sends a clear message to businesses; even if you are not directly aware of VAT fraud, being involved in transactions connected to fraudulent activity can lead to denial of input VAT claims and the imposition of penalties if it is judged that you “should have known”. We recommend strong compliance controls and regular supplier checks to reduce risks involved in fraud.
H RIPLEY & CO LIMITED V HMRC
Do you export goods outside the UK?
H Ripley & Co Ltd (HR) sold scrap metal to a Belgian customer in 2016, treating the sales as zero-rated. In 2017, HMRC challenged this, arguing HR failed to provide sufficient evidence as required by VAT rules for VAT zero-rating. The First-tier Tribunal rejected HR’s appeal, a decision later upheld by the Upper Tribunal (UT) which agreed that whilst the company submitted various documents including CMRs, weighbridge tickets, and other correspondence, this evidence was either incomplete, undated or, produced far too late.
Despite multiple grounds of appeal, including arguments around procedural fairness, the UT dismissed them all.
The ruling reinforces HMRC’s strict approach for evidence needed for non-UK sale of goods. Businesses involved in non-UK sales must ensure that they collect and retain complete, dated and contemporaneous evidence, completing documentation in full, proving that the goods physically left the UK within the statutory timeframe.
Missing, delayed or incomplete documentation can result in VAT assessments and costly disputes.
UBER BRITANNIA LTD
The Supreme Court has rejected Uber’s appeal to have its regional competitors outside London classified as principals for VAT purposes, denying the company the same tax treatment it currently receives. Historically, Uber treated itself as an agent, simply connecting the driver and passenger, with its self-employed drivers providing the transport services and assuming responsibility for any VAT due.
The decision means that Uber and other London-based private hire vehicle (PHV) operators will continue to be tied to being a principal in view of the regulatory environment - whereas firms located outside are not. The appeal also affirmed that PHV operators outside London are not legally required to contract directly with passengers.
HMRC willl pursue Uber for substantial VAT liabilities on the grounds that the company was acting as the principal in the transactions, and not just an intermediary.
The case sets a precedent for how digital platform business models can greatly impact tax liability, and how VAT liabilities hinge on contractual relationships and service structuring, and highlights the regulatory divergence between London and the rest of the UK, where different rules apply to PHV operators.
PERFORMANCE LEADS LTD V HMRC
Exempt financial intermediaries or taxable advertiser?
Between May 2018 to February 2022, Performance Leads Ltd (PL) ran websites generating and filtering consumer leads for independent financial advisors. PL claimed VAT exemption as an intermediary under Item 5, Group 5, Schedule VAT Act 1994, but HMRC classified the services as taxable advertising and denied a VAT refund.
In March 2025, during PL’s appeal, the FTT confirmed that VAT exemption under Item 5 requires one of two criteria to be met:
- Connecting customers and service providers, or
- Performing preparatory work for contract formation.
The FTT found that PL met both the above by filtering and qualifying leads before passing them on, exceeding the role of ‘mere conduit’.
Businesses that filter, qualify, or pre-screen leads for financial or professional services can claim VAT exemption under Item 5, even if they do not perform contract signing roles. A clearing or qualifying process elevates service status from taxable advertising to exempt intermediary – mere referral is not enough; some work must be done.
JP MORGAN CHASE BANK v HMRC
The Upper Tax Tribunal was found in favour of HMRC in the JP Morgan Chase Bank (JPM) case regarding the VAT position of intra-VAT group supplies. The main issue concerns whether the intra-VAT group services provided by JPM Bank to JPM Securities Plc should be treated as a single composite supply or as separate distinct services, and whether any part of these services qualifies for VAT exemption under financial services rules.
The UTT decision was on the following basis:
- The UTT agreed with HMRC that the supply of services in question constituted a single supply for VAT purposes, as opposed to a multiple supply as JPM argued.
- While JPM accepted that the supply would be taxable if viewed as a single supply, the UTT went on to consider the application of the securities, payments, and fund management exemptions. Concluding that, even if viewed as a multiple supply, the elements fell short of exemption
This serves as a reminder that partially exempt VAT groups should regularly check their intra-group service arrangements to make sure no services fall outside the VAT group rules, which would trigger a VAT liability.
We’re here to help
From complex transactions to industry-specific VAT challenges, our dedicated VAT team brings a wide range of expertise from across all sectors. Whether you need strategic advice or help with day-to-day queries, we are here to help, please get in touch with our VAT team via the form below.
