Weekly VAT News

We are delighted to invite you to join us for an exclusive event, where experts from EY, Meridian, JLR and SAP will explore the evolving landscape of global tax mandates and the importance of achieving accurate data from your core SAP platform from the outset.

The event will take place at our 1 More London Place office, London, SE1 2AF on Wednesday, 16 September 14:30-17:00. In this session, we will discuss the following key topics:

• The importance of tax being involved in the S/4HANA project and how they can benefit from the project
• The significance of data in the indirect tax transformation journey
• SAP updates on the latest technologies including BTP, BDC and AI
• The JLR S/4HANA tax determination story

Secure your spot now to gain expert insights, practical strategies and actionable steps to stay compliant. For further information on how to register please contact Ruby Buckland.

Join EY and ServiceNow for an exclusive, executive workshop exploring how AI, automation and connected workflows are reshaping the future of tax.

The event will take place at the Royal Society of Arts, RSA House, 8 John Adam Street, London, WC2N 6EZ on Tuesday, 22 September, 09:00 – 13:00.

This workshop will be of interest to Heads of Tax, Heads of Tax Transformation and Tax Technology leaders who want to get ahead of the next wave of digital transformation. It will bring together fresh perspectives, practical demonstrations and peer discussion to show how AI-powered workflows, connected data and intelligent automation can help tax functions work smarter, strengthen compliance outcomes and create greater strategic value for the business.

During the workshop, we will explore:

• What is changing across the tax compliance landscape and why it matters now
• How high-quality data can become the foundation for faster, more effective tax operations
• How EY and ServiceNow are combining tax insight and workflow technology to bring AI-powered transformation to life
• Live demonstrations of tax-focused agents, emerging use cases and practical applications
• Peer discussion on current pain points, investment priorities and future opportunities
• How to build a compelling business case for tax transformation

This workshop offers a valuable opportunity to connect with peers, challenge current thinking and see how AI, automation and workflow orchestration could help shape a more agile, insight-led tax function.

Spaces are limited; we encourage you to register early using this link.

For further information please contact Ruby Buckland.

We are delighted to invite you to join us for an exclusive event, where specialists from EY, SAP and Thomson Reuters will explore how organisations can use their SAP S/4HANA transformation as an opportunity to build a more connected, intelligent and resilient tax operating model.

The event will take place at Lucky Cat by Gordon Ramsay, Mayfair, on Thursday, 24 September from 17:00–21:00. During this roundtable held over a private dining experience, we will discuss the following key topics:

• The importance of embedding tax capability into your SAP architecture from the outset, not as an afterthought
• How a modern tax operating model can reduce manual effort and regulatory burden across a complex environment
• How to build flexibility and resilience into tax operations so they can adapt as regulations and markets evolve
• What is working in practice for tax leaders navigating similar SAP S/4HANA transformation challenges

Secure your place now to gain insights, practical strategies and the opportunity to exchange perspectives with peers over dinner. For further information on how to register, please contact Ruby Buckland.

The new EU customs rules are a comprehensive overhaul of the current framework, with far-reaching implications for businesses importing into and exporting from the EU. The reform introduces a new approach to compliance, changes to the role of the importer and a redesigned digital customs environment. These developments may particularly affect non-EU-established businesses and companies operating complex supply chains. In this webcast, EY global trade professionals will explore the key elements of the reform and their impact on compliance, data and supply chains, with practical insights to help businesses prepare.

This webcast is being delivered twice to accommodate participants across different time zones. Please select the session that best suits your location during registration. Both sessions will cover the same content and include time for Q&A.

Date and Time
Tuesday, 27 October 2026. 08:00-09:00 UK time (Session 1) / 16:00-17:00 UK time (Session 2)

Topics to be discussed include:

• Key elements of the proposed reform of the EU Customs Union
• Potential impact of the changes on current operating models
• Implications for non-EU established businesses and the role of the importer
• The proposed changes to compliance requirements including customs data reporting
• Considerations for preparing your organisation for the transition

Please register for this event here.

Trade Talking Points is our fortnightly newsletter on the latest insights from EY's Trade Strategy team.

In this edition we provide updates on trade policy developments, including the European Commission setting out the evidential requirements for ‘melt and pour’ origin reporting under the EU Steel Regulation, Vietnam and MERCOSUR commencing negotiations for a Preferential Trade Agreement, and Switzerland and China concluding negotiations for an enhanced Free Trade Agreement.

For further information please contact Shenshen Lin, Gerard Koevoets, Ross Freeman or Jack Earye.

The Minister of Finance and National Revenue has announced that following the US decision to impose a new 50% tariff on CA$27.6b of Canadian goods effective 22 August 2026, Canada will match the US tariffs dollar for dollar, rate for rate, with additional Canadian tariffs on US goods.

The government has also announced the introduction of a CA$7.5b package of new support measures for Canadian workers and businesses, particularly small and medium-sized businesses, in sectors most affected by the new US tariffs.

Canadian businesses importing goods from the US should determine whether their products are subject to the counter-tariffs, confirm the applicable tariff classification, origin and valuation, and assess the potential implications.

Please refer to our global tax alerts:

• Canada announces counter-tariffs in response to new US tariffs
• US Customs and Border Protection issues guidance on filing entries as Section 338 duties on certain Canadian goods take effect.

The Customs and Border Protection (CBP) agency has published an Advance Notice of Proposed Rulemaking titled Heightened Import Disclosures for Supply Chain Visibility. Please refer to our Global Tax Alert here.

The notice is the first step toward the implementation of Section 3 of Executive Order 14411, titled "Strengthening Customs Enforcement," which directed the Department of Homeland Security and CBP to establish heightened import disclosure requirements and obtain additional information regarding foreign exporters, supply chains and imported merchandise.

Consistent with the Executive Order, CBP is evaluating measures that would require disclosure of detailed supply chain information, collection of foreign export documentation and expanded identification of the parties involved in the manufacture, production, movement and exportation of goods imported into the US. The notice does not impose new obligations; rather, it signals the data collection, recordkeeping and compliance requirements that CBP may pursue in a future proposed rule, and the breadth of the questions posed suggests that changes could reach importers, brokers, manufacturers, foreign suppliers and logistics providers across a wide range of industries.

For more on Executive Order 14411, see EY Global Tax Alert, US President issues Executive Order strengthening customs enforcement; enhanced importer requirements, disclosure obligations and penalties announced, dated 4 June 2026.

Canada has ratified the UK’s accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the final country to do so. From 1 September 2026, UK businesses have access to all 11 CPTPP member countries.

See the UK press release here.

For further information please contact Shenshen Lin or Gerard Koevoets.

Topics – Immovable property, VAT deduction following change in taxable to exempt use of building, transfer of business where lessor is also transferor

T-397/25 A&P Deco

On 2 September 2026, the General Court of the European Union (GCEU) released its decision in this Belgian referral concerning the tax administration’s decision to adjust the VAT originally deducted on a building, since its activity changed from an operation subject to VAT (garden centre) to a letting exempt from VAT. The referral asks whether Articles 14, 19, 24, 29 and 184 to 190 of the VAT Directive, as well as the principle of neutrality laid down in Article 1(2) of the same directive, must be interpreted as meaning that, where the possession of immovable property is made available by a commercial lease following the transfer of the business, no adjustment must be made to the transferor of the business, which is also the lessor of the immovable property, in respect of the deduction of the VAT charged on the acquisition, construction, renovation or improvement of the parts of the business premises leased to the transferee and further used by the transferee for the carrying on of the taxable activity taken over.

A&P Deco (A&P) operated a garden centre and in 2013, following retirement, transferred the business to WR Woestijnroos BV (WR). Pursuant to domestic legislation, it considered the transfer as outside the scope of VAT as the transfer of a going concern. On the same day, A&P also leased the business premises to WR by means of a commercial lease, so that it could continue to operate the business.

The tax authorities considered that the building fell outside the transfer of a going concern provisions as it was retained by A&P, and that there had been a change of use in the building. It adjusted the VAT originally deducted on significant development and redevelopment costs. The activity of leasing the building is exempt from VAT with the result that there is no longer a right to deduct VAT. The building was no longer used by A&P for its fully taxable business.

A&P argued that the transfer of its business to WR fell within domestic legislation which is based on Article 19 of the VAT Directive. Although the right of ownership of the building was not transferred, its possession was made available to the transferee by means of a commercial lease. According to A&P, that was sufficient for the building to be regarded as belonging to the totality of assets transferred. Provided it is used for the same activity subject to VAT, the building does not undergo any change of use. Consequently, any obligation to repay the deducted VAT on building costs lies with the transferee and not with the transferor.

The GCEU recalled that the right to deduct input VAT is a fundamental principle of the EU VAT system. Its purpose is to relieve taxable persons entirely of the VAT burden incurred in carrying on economic activities and to ensure fiscal neutrality, provided those activities are subject to VAT.

The provisions on adjustment of deductions are contained in Articles 184 to 185 of the VAT Directive, which set out the general rules, while Articles 187 to 189 contain specific rules for capital goods. The adjustment mechanism forms an integral part of the VAT deduction system and is designed to ensure that deductions accurately reflect the actual use of goods and services in making taxable supplies, thereby preserving VAT neutrality. Pursuant to Articles 184 to 190, adjustments are required where the factors determining the original deduction subsequently change, including where goods cease to be used for transactions giving rise to a right of deduction.

The GCEU noted that in the immediate case, A&P let to the transferee of the business (WR) a part of the business premises previously used in respect of taxable output transactions. That letting activity is exempt from VAT in accordance with the VAT Directive and the applicable national legislation. In those circumstances, the fact that those premises are no longer used to carry out taxable transactions leads to a change in the factors which must be taken into account to determine the right to deduct. It follows that a proportional adjustment of the initial deduction of VAT must be carried out.

The GCEU considered that this conclusion is not called into question by the judgment in C-201/18 Mydibel. In that case, the Court ruled in a context characterised by the retention by the owner of the property concerned of the use of that property for taxable output transactions, notwithstanding the sale and lease back transaction at issue. By contrast, the situation at issue in the immediate proceedings differs in that the property, initially used for an economic activity subject to VAT, namely the garden centre, is now used for the purposes of an exempt transaction, namely letting.

However, the GCEU noted that the referring court asks more specifically whether the fact that the business premises is let exempt from VAT to the recipient of the transfer of a totality of assets within the meaning of Articles 19 and 29 of the VAT Directive, precludes the obligation to adjust for the transferor.

The GCEU recalled that Articles 19 and 29 allow Member States to treat a transfer of a business as outside the scope of VAT, meaning that no taxable supply of goods or services is regarded as taking place and the recipient is treated as the successor to the transferor. This concept covers the transfer of a business or an autonomous part of a business capable of carrying on an independent economic activity, including both tangible and intangible elements. It does not extend to a mere transfer of individual assets. Whether immovable property must be transferred depends on the nature of the activity concerned, and in some cases a business can be transferred without transferring ownership of premises, including where the premises are instead made available under a lease.

In the immediate proceedings, the central issue is whether a lease granted by the transferor to the transferee at the time of the business transfer forms part of the transfer of a totality of assets. The GCEU concluded that it does not. While an existing leasehold right may be an intangible element transferred as part of a business, a new lease created by the transferor at the point of transfer is not a pre-existing asset of the business but a newly created right. Accordingly, it falls outside the scope of provisions in Articles 19 and 29.

The GCEU considered that although the business transfer itself is treated as outside the scope of VAT, A&P remains responsible for any required VAT adjustment. The fact that WR continues the taxable activity does not alter that obligation. The Court emphasised that A&P’s use of the property must be assessed independently and, where it is now used for VAT-exempt activity, the adjustment rules continue to apply.

The GCEU rejected arguments based on Faxworld, considering that this case concerned very specific circumstances involving a partnership established solely to prepare for the activities of a future company. The exception recognised in that case was confined to those facts and does not apply where an ongoing business is transferred and the transferor subsequently grants the transferee a new lease of the premises.

Finally, the GCEU considered that its interpretation of Articles 19 and 29 is consistent with the principle of VAT neutrality. The VAT adjustment mechanism exists to ensure that input VAT deductions are retained only where goods or services continue to be used for taxable transactions. Allowing a deduction to remain where a property is subsequently used for VAT-exempt leasing activities would undermine that principle. The GCEU also held that distinguishing between a business transfer accompanied by a lease of the property and a transfer that includes the sale of the property does not breach fiscal neutrality, because a transferor who leases the property after the transfer is carrying on a VAT-exempt letting activity and is therefore in a position comparable to any third-party landlord who lets commercial premises to the transferee.

In summary, Articles 14, 19, 24, 29 and 184 to 190 of the VAT Directive, and the principle of VAT neutrality, must be interpreted as meaning that where, in the event of the transfer of a business as a transfer of a totality of assets, the transferor of that business lets, exempt from VAT, to the transferee, an immovable property and that property continues to be used by the transferee in respect of the exercise of the taxable activity taken over, an adjustment must be made, by the transferor, to the VAT deduction applied to the acquisition, construction, renovation or improvement of that immovable property.

Comments: Where there is any business restructure or sale which involves property, advice should be sought early to avoid unexpected VAT costs. In the immediate proceedings the GCEU has suggested that the referring court should oppose the attempt by A&P to separate continued ‘legal ownership’ from ongoing ‘tax responsibility’ under the transfer of a going concern provisions. It is worth bearing in mind that this is subject to the judgment in Mydibel (Case C-201/18), which was expressly referred to and distinguished by the GCEU. That case was concerned with a sale and leaseback of premises, and the judgment was that there was no need to make adjustments were a taxable business continued to use the premises for its taxable business despite having made an exempt sale followed by the leaseback. This case is different as there is no continued taxable use of the building by the taxpayer.

For further information please contact Ali Anderson.

Topics – Transfer of developed properties by a taxable person who has used the properties, whether making a supply of goods for consideration

T-413/25 Peckeger

On 2 September 2026, the General Court of the European Union (GCEU) released its decision in this Austrian referral which asks whether Article 2(1)(a) of the VAT Directive is to be interpreted as meaning that the transfer of developed properties by a taxable person who has previously used those properties, through rental, for the purposes of (deductible) taxable transactions, to a company of which he or she is the sole shareholder (with the result that no additional company shares are issued for that contribution) is to be regarded as a supply of goods for consideration. If answered in the negative, is the first paragraph of Article 16 of the VAT Directive to be interpreted as meaning that the transaction in question gives rise to the disposal free of charge by a taxable person, preceding the contribution, of goods forming part of his or her business assets or, more generally, their application for purposes other than those of his or her business. Does Article 19 preclude a national provision under which, in the event of a transfer of a totality of assets or part thereof (businesses or parts of businesses), it is considered that no supply of goods has taken place only in cases of reorganisation (which exists under national law only where those assets are used to generate certain kinds of income). Does Article 19 have direct effect such that a taxable person may rely on the no-supply rule before a national court against the tax authority if, before the Member State acceded to the European Union, the national legislature introduced a provision, retained since then, which is applicable only to certain cases, but not to business assets which are used to generate income (under national law on tax on profits) from rental and leasing.

This referral concerns the VAT treatment of a transfer of several rental properties by the applicant, a sole trader, to R GmbH, a company of which he was the sole shareholder and manager. The transfer was made as a contribution in kind without the issue of new shares and was treated by the applicant as a transfer of a totality of assets under Austrian restructuring legislation, meaning it was not subject to VAT. However, the Austrian tax authority disagreed, arguing that FR’s activity constituted asset management rather than a commercial business. It consequently adjusted previously claimed input VAT deductions, treating the transfer as exempt from VAT without a right to deduct.

The applicant challenged the decision and the Federal Finance Court held that the transfer did not constitute a transfer of a totality of assets. It also found that, because the contribution itself was not subject to VAT, there had been a change in the circumstances relevant to the original input tax deduction. The applicant appealed to the Austrian Supreme Administrative Court.

The referring court seeks guidance from the GCEU on three issues: whether the contribution of immovable property to a company constitutes a taxable supply under the VAT Directive; whether Member States may restrict the VAT ‘no-supply’ rule for transfers of a totality of assets to assets generating particular categories of income; and whether Article 19 of the VAT Directive, which contains that rule, has direct effect.

The GCEU recalled that Article 19 allows Member States to treat the transfer of a business, or part of a business, as not constituting a supply of goods for VAT purposes, meaning that no VAT is chargeable and the recipient is treated as the successor to the transferor. The GCEU emphasised that, where a Member State has adopted this rule, transfers of a totality of assets must generally fall within its scope. The only permitted limitations are those expressly set out in the second paragraph of Article 19, namely where restrictions are necessary to prevent distortions of competition or tax evasion and avoidance in cases involving recipients who are not fully taxable persons.

The GCEU considered that these exceptions are exhaustive and Member States cannot introduce additional restrictions. Consequently, a Member State cannot limit the ‘no-supply rule’ to transfers of businesses generating particular types of income while excluding others.

The GCEU further considered that Article 19 forms part of a wider set of provisions identifying which transactions are taxable and which are not. Its purpose is to facilitate the transfer of businesses by avoiding unnecessary VAT charges that would ultimately be recoverable through input tax deduction, thereby preventing administrative and financial burdens for business purchasers. The rule is not a derogation requiring strict interpretation, but a mechanism designed to support continuity of business activity. Accordingly, the GCEU concluded that Article 19 precludes national legislation restricting the ‘no-supply’ rule to transfers of businesses generating certain categories of income unless such restrictions can be justified under the specific grounds set out in the second paragraph of Article 19.

The GCEU also considered the referring court’s question as to whether the first paragraph of Article 19 has direct effect. Specifically, the court asked whether a taxable person could rely directly on Article 19 before a national court to argue that a transfer of a business, or part of a business, should not be treated as a supply of goods for VAT purposes where the Member State had chosen to implement Article 19 before joining the EU, but had limited its application to certain specified categories of transfer. In those circumstances, the question is whether the taxable person could invoke the wider protection afforded by Article 19 against the tax authority, notwithstanding the more restrictive national legislation.

As a preliminary matter, the GCEU noted that this question only arises if the national restriction on the ‘no-supply’ rule cannot be justified under the limited exceptions permitted by the second paragraph of Article 19. The GCEU also observed that the Austrian legislation implementing the rule predated Austria’s accession to the EU and did not appear to be protected by any standstill provision allowing Austria to maintain a different interpretation of the Directive.

The GCEU reviewed the established principles governing the direct effect of EU directives. A directive may be relied upon by individuals where its provisions are sufficiently precise and unconditional, even if the Member State has either failed to implement it correctly or has implemented it incompletely. A provision is sufficiently precise when it clearly defines the rights and obligations it creates, and unconditional when its operation is not dependent on further action by EU institutions or Member States.

Applying those principles, the GCEU found that Article 19 clearly and precisely sets out the circumstances in which the transfer of a totality of assets or part thereof is not to be treated as a supply of goods for VAT purposes. Although Article 19 grants Member States some discretion, that discretion does not prevent individuals from relying on the provision where the content of the right can be determined from the Directive itself. The GCEU emphasised that a Member State cannot rely on national restrictions that are inconsistent with EU law to deny a taxpayer the benefit of Article 19.

On this point, the GCEU concluded that the first paragraph of Article 19 has direct effect. A taxable person may therefore invoke it before a national court against a tax authority where national legislation unlawfully restricts the scope of the ‘no-supply’ rule beyond the limits permitted by the VAT Directive.

The GCEU went on to consider whether Article 2(1)(a) of the VAT Directive must be interpreted as meaning that the contribution, by a taxable person, of developed properties, let subject to VAT, in respect of which VAT is deductible, to an undertaking of which the taxable person is the sole shareholder, without any new shares being granted to that taxable person as consideration for that contribution, must be regarded as a supply of goods for consideration.

The GCEU recalled that Article 2(1)(a) applies only where a supply of goods is made for consideration, meaning there must be a legal relationship involving reciprocal performance and a payment or benefit received in return. The GCEU considered that in the immediate proceedings, the transfer of VAT-taxable rental properties by the applicant to a company of which he was the sole shareholder, without receiving new shares or any other consideration, did not involve reciprocal performance. Accordingly, subject to verification by the national court, the transfer was not a supply of goods for consideration and therefore did not constitute a taxable transaction under Article 2(1)(a) of the VAT Directive.

Finally, the GCEU considered whether the first paragraph of Article 16 of the VAT Directive must be interpreted as meaning that the contribution, by a taxable person, of developed properties let subject to VAT, in respect of which VAT is deductible, to an undertaking of which he or she is the sole shareholder, without any new shares being granted to him or her as consideration for that contribution, constitutes an application of goods forming part of his or her business assets which he or she transfers free of charge or, more generally, applies for purposes other than those of his or her business, to be treated as a supply of goods for consideration within the meaning of that provision.

The GCEU recalled that Article 16 treats certain free transfers of business assets as taxable supplies where the VAT on those assets was previously deductible. In the immediate case, the applicant transferred VAT-taxable rental properties to a company of which he was the sole shareholder without receiving any consideration. Because the transfer was made free of charge and input VAT had been deducted on the properties, the conditions of Article 16 were met. The Court therefore concluded that the transfer constituted an application of business assets for purposes other than the applicant’s business and must be treated as a supply of goods for consideration for VAT purposes.

In summary:

• Article 19 must be interpreted as precluding national legislation which restricts the rule, laid down in that article, that no supply of goods has taken place upon the transfer of a totality of assets or part thereof to a taxable person, solely to transfers of certain business assets or parts of a business intended to generate certain types of income, unless such a restriction is justified by one of the grounds set out in the second paragraph of Article 19 of that directive.
• The first paragraph of Article 19 must be interpreted as having direct effect, with the result that a taxable person may rely on, before a national court, the rule that no supply of goods has taken place upon the transfer of a totality of assets or part thereof to a taxable person, against the competent tax authority, where the national legislature, before the accession of the Member State concerned to the EU, has opted for the application of that rule, but restricted the scope of that rule to certain specific cases not covered by the second paragraph of Article 19.
• Article 2(1)(a) must be interpreted as meaning that the contribution, by a taxable person, of developed properties, let subject to VAT, in respect of which VAT is deductible, to an undertaking of which the taxable person is the sole shareholder, without any new shares being granted to that taxable person as consideration for that contribution, does not constitute a supply of goods for consideration.
• The first paragraph of Article 16 must be interpreted as meaning that the contribution, by a taxable person, of developed properties let subject to VAT, in respect of which VAT is deductible, to an undertaking of which he or she is the sole shareholder, without any new shares being granted to him or her as consideration for that contribution, constitutes an application of goods forming part of his or her business assets which he or she transfers free of charge or, more generally, he or she applies for purposes other than those of his or her business, within the meaning of that provision, which is to be treated as a supply of goods for consideration.

Comments: This decision is significant because it strengthens the protection afforded by Article 19 and limits the ability of Member States to narrow its scope through domestic legislation. Taxpayers can rely directly on Article 19 where national rules are incompatible with EU law. However, the judgment also confirms that where a transfer of assets is made free of charge and previously benefited from input VAT recovery, Article 16 may still create a VAT charge even if the transfer is not a supply for consideration under Article 2(1)(a). The case therefore highlights the importance of considering both Articles 19 and 16 when restructuring property and business assets.

For further information please contact Ali Anderson.

Wednesday 9 September

Judgment – T-366/25 Szytelbiecka

Topics – Supply of goods – asset transfer to non-taxable individuals

A Polish referral which asks whether Article 19 of the VAT Directive must be interpreted as meaning that a transfer of a totality of assets within the meaning of that provision also occurs when there is a transfer without consideration by a taxable person of a half share each of a totality of assets to two individuals who are not taxable persons and who intend to contribute those shares immediately as a contribution in kind to a business partnership of which they are partners.

Judgment – T-614/25 Trading 4

Topics – Duty suspension arrangement – triangular transaction

A Latvian referral whish asks whether Article 138(1) of the VAT Directive, read together with Article 141 and Article 197(1), must be interpreted as meaning that, where products subject to excise duty are supplied under a duty suspension arrangement in a triangular transaction and the person liable for the VAT is determined to be the taxable person for the purposes of that tax established in a third Member State, that in itself constitutes a reason – in accordance with Article 138(1) of that directive – for exempting from that tax the supply carried out by the taxable person (for VAT purposes) established in the first Member State to the taxable person (for VAT purposes) established in the second Member State, on the condition that it is proved in the proceedings that the goods were actually exported from the first Member State and were delivered in the third Member State.

Thursday 10 September

Judgment – C-565/24 – P-GmbH & Co. KG

Topics – Tour Operators Margin Scheme – negative margin

A German referral which asks whether 'travel organised by the trader off-premises' within the meaning of the first indent of Article 1(1) of Directive 85/577 is considered to be 'transactions carried out by the travel agent in connection with a trip' within the meaning of the first sentence of Article 26(2) of Directive 77/388 (Sixth VAT Directive). If answered in the affirmative, must the special scheme for travel agents referred to in Article 26 of Directive 77/388 apply even if the margin valid as a taxable amount under the third sentence of Article 26(2) is negative because the actual costs are greater than the 'total amount, excluding VAT' payable by the traveller. If the answers to the first and second questions are in the affirmative, must the first sentence of Article 12(1) of that directive be applied to the margin valid as a taxable amount within the meaning of the third sentence of Article 26(2), even if the margin is negative, with the result that a negative margin results in a refund in favour of the taxable person.

T-435/26 Finanzamt Österreich – An Austrian referral which asks whether Articles 4(a) and 314(d) of the VAT Directive and Article 16 of Council Implementing Regulation 282/2011 must be interpreted as meaning that a taxable dealer to whom goods have been supplied by another taxable dealer from another Member State, who has applied the margin scheme, can benefit from non-taxation of the intra-Community acquisition and the margin scheme in respect of his or her supplies within the country (in this case, Austria) only if the application of the margin scheme in the other Member State (in this case, Germany) is in accordance with the requirements laid down in the VAT Directive.

Topics – Input tax – motor car – whether appellant objectively intended at time of acquisition to use the car primarily for self-drive hire or hire with a driver

Luxurico Ltd

The First-tier Tribunal (FTT) has released its decision in this case concerning Luxurico Limited, which operates a luxury vehicle hire business under the trading name Platinum Executive Travel. The dispute related to whether Luxurico was entitled to recover £477,508.60 of input VAT incurred on the importation and acquisition of a ‘hypercar’ in November 2020.

HMRC refused the claim on the basis that input tax on motor cars is generally blocked from recovery. Luxurico argued that the vehicle was acquired as a flagship asset for its luxury hire business and was intended primarily for self-drive hire and hire with a driver. HMRC accepted that Luxurico operated a genuine vehicle hire business and that the vehicle had been advertised for hire but contended that the evidence did not show that commercial hire was the vehicle’s primary intended use.

HMRC relied on limited evidence of completed hires, incomplete mileage records, gaps in insurance evidence, and social media content suggesting a personal connection to the vehicle.

Luxurico responded that the relevant question was its intention when the vehicle was acquired and that subsequent commercial difficulties arose because of Covid-19 restrictions, mechanical problems affecting the vehicle, and a significant accident in June 2021 that kept the vehicle off the road for an extended period.

The legal issue in this case was governed by Article 7 of the Value Added Tax (Input Tax) Order 1992. Under Article 7(1), input VAT incurred on the acquisition or importation of a motor car is normally irrecoverable. However, Article 7(2E)(b) provides an exception where, at the time of acquisition, the taxpayer intends to use the vehicle primarily for a ‘relevant purpose’. Article 7(2F) defines relevant purposes to include ‘self-drive hire and hire with a driver for carrying passengers’.

The FTT noted a number of established legal principles. Entitlement to deduct input tax must be determined at the time the tax is incurred, not by reference to later events. The legislation focuses on intended use rather than actual use, and intention must be assessed objectively from the surrounding facts and circumstances rather than by reference to a taxpayer’s subjective wishes. Subsequent events may assist as evidence of original intention but do not themselves determine entitlement. The burden of proof rested on Luxurico to establish, on the balance of probabilities, that the vehicle was intended primarily for a qualifying hiring purpose when acquired.

Allowing the appeal, the FTT accepted that Luxurico was carrying on a genuine luxury vehicle hire business and that the ‘hypercar’ was acquired as a flagship vehicle designed to expand the business into the ‘hypercar’ hire market. Significant weight was given to objective evidence existing at or near the time of acquisition, including evidence of commercial interest before the vehicle arrived in the UK, anticipated bookings, insurance arranged specifically for self-drive hire, and marketing materials presenting the vehicle as available for hire. The FTT considered these factors to be strong indicators of a commercial hire intention.

Although the FTT accepted HMRC’s criticisms regarding incomplete mileage records and limited documentary evidence of completed hires during 2020 and 2021, it concluded that these weaknesses did not establish private use. Instead, the evidence showed that the vehicle experienced persistent mechanical issues shortly after delivery, required repeated repairs and specialist attention, and was later involved in an accident while being used by a customer. The resulting repair process, combined with Covid-19 restrictions affecting the luxury events market, significantly reduced the vehicle’s availability and commercial opportunities. The FTT therefore regarded the reduced level of hiring activity as having a credible explanation unrelated to the taxpayer’s original intention.

The FTT also rejected HMRC’s reliance on YouTube videos, social media content and evidence relating to motoring events and travel. The FTT found that personal enthusiasm and enjoyment could be consistent with a commercial purpose. It accepted evidence that social media formed an important part of Luxurico’s marketing strategy and concluded that the material relied upon by HMRC did not demonstrate that personal use was the dominant intended purpose of the vehicle.

In conclusion, the FTT held that Luxurico had discharged the burden of proving that, at the time of acquisition and importation in November 2020, it objectively intended to use the vehicle primarily for self-drive hire and hire with a driver. As the statutory exception in Articles 7(2E) and 7(2F) applied, the normal input tax block for motor cars did not apply. Luxurico was entitled to recover the input VAT incurred on acquiring the vehicle.

Comments: This decision serves as a useful reminder that recovering VAT in full on the purchase of a motor vehicle remains a common area of HMRC challenge. Taxable persons recovering VAT in full may therefore wish to make sure that the appropriate rules are met and evidence held to support that position.

The Scotland Act 2016 included powers in relation to the Scottish Air Departure Tax (ADT), and the Air Departure Tax (Scotland) Act 2017 has been enacted. The next step has now been taken in the introduction of the ADT. The Air Departure Tax (Scotland) Act 2017 (Commencement No. 1) Regulations 2026 have been made, allowing further regulations to be made regarding tax rates/bands etc. The ADT is expected to come into force in 2027 – Air Departure Tax.

HMRC has published Revenue and Customs Brief 9 (2026): VAT liability of supplies of education by alternative providers of higher and further education.

It provides an update on HMRC’s position on the VAT treatment of supplies of education and closely related services provided by alternative providers, and the implications of the Court of Appeal’s decision in St Patrick's International College Ltd & Ors.

This case considered whether certain supplies of higher education made by St Patrick’s International College, London College of Contemporary Arts and Interactive Manchester should have been exempt from VAT under Article 132(1)(i) of the VAT Directive or Group 6 of Schedule 9 to the VATA94. The taxpayers argued that the UK had failed to properly implement Article 132(1)(i), entitling them to rely directly on the Directive. Alternatively, they contended that their supplies qualified for exemption under specific provisions of Group 6.

The FTT rejected those arguments, and the UT upheld that decision, finding that the UK’s implementation did not breach the principle of fiscal neutrality. The central issue before the Court of Appeal was whether fiscal neutrality should be assessed using the consumer-focused test established in Rank Group, under which different VAT treatment is unlawful where services are sufficiently similar from the perspective of the typical consumer. The taxpayers argued that their HNC and HND courses were materially indistinguishable from those supplied by universities, colleges of universities and further education corporations, and that the UT had wrongly focused on differences in regulatory status. HMRC argued that the Rank test applied only to the similarity of supplies and not to supplier conditions within Article 132 exemptions.

The Court of Appeal examined its earlier decision in Leisure, Independence, Friendship and Enablement Services Ltd (LIFE) and concluded that it was binding authority. It held that LIFE established that, even where an exemption contains a supplier condition, compliance with fiscal neutrality must be assessed from the perspective of the typical consumer. The CA rejected HMRC’s arguments that LIFE was not binding and held that the FTT and UT had erred in law by applying a supplier-comparability test instead of the Rank test. As HMRC did not dispute that students would regard the courses as equivalent to those offered by recognised exempt providers, the CA concluded that excluding the taxpayers’ courses from exemption breached fiscal neutrality.

HMRC has now received permission to appeal the Court of Appeal’s decision to the Supreme Court, and its long-standing policy remains that supplies of education made by providers that are not eligible bodies are subject to the standard rate of VAT, and that the perspective of the typical consumer does not apply to alter this position.

However, following the Court of Appeal’s decision, HMRC recognises that some businesses may want to protect their position, pending the outcome of the appeal to the Supreme Court. Alternative providers who believe they are in the same position as St Patrick’s International College can therefore submit a claim for a refund of VAT.

HMRC says it will review claims on a case-by-case basis, taking into consideration:

• Unjust enrichment
• Partial exemption
• Whether overdeclared VAT has been correctly accounted for across the supply chain

It also notes that “HMRC will protect its position to secure tax revenues, pending the outcome of the appeal to the Supreme Court.”

For further information please contact Emma Hughes.

HMRC has published factsheet CC/FS68A on electronic sales suppression (ESS) and possession of tools which provides details on compliance checks and penalties for possession of ESS tools.

An ESS tool is a piece of software, computer code script or hardware. It allows a business to hide or reduce the value of individual transactions on its electronic sales records. This includes using and/or configuring a till, or point of sale (POS) system, in a way that suppresses sales.

The factsheet explains in detail HMRC's information powers under Schedule 14 Finance Act 2022, including the use of information notices for ESS.

This Guidance provides a provisional list to help importers prepare for the introduction of the Carbon Border Adjustment Mechanism (CBAM) by providing clarity on overseas carbon pricing schemes that currently meet the qualifying criteria, as set out in The Carbon Border Adjustment Mechanism (Calculation of CBAM Rate and Determination of Carbon Price Relief) Regulations 2026.

It supports the assessment of whether embodied emissions in a CBAM good have been subject to an overseas carbon pricing scheme that may be eligible for relief under UK CBAM rules.

The list is based on the information available as of 19 June 2026 and will be updated as further schemes are assessed.

The list is not exhaustive. The Government is aware there are some regional schemes that may also meet these criteria currently, as well as some schemes currently in development, that may meet these criteria when they are finalised and introduced. The Government will keep this draft list under review and publish an updated list in due course.

For further information, please contact Laura Mariga.

Businesses are being reminded to prepare for Vaping Products Duty (VPD) and the Vaping Duty Stamps Scheme which start on 1 October 2026.

VPD will become part of the existing excise regime set out in the Customs and Excise Management Act 1979 and will apply to all vaping liquids. The excise duty rate is £2.20 per 10ml, as announced at Autumn Budget 2024.

Retailers and wholesalers can continue to sell eligible unstamped stock they already hold until 31 March 2027. From 1 April 2027, all vaping products outside duty suspension in the UK must carry a valid vaping duty stamp.

Please also refer to Vaping Products Duty and Vaping Duty Stamps Scheme: detailed information.

For further information, please contact Craig Clark.

HMRC has updated its Alternative Dispute Resolution (ADR) factsheet – Alternative dispute resolution – CC/FS21.

The guidance has been re-ordered and re-written in places. Updates include:

• Confirmation that ADR remains a non-statutory process, each application is considered case by case and HMRC may reject an application that is not suitable
• The section on cases which are not suitable for ADR has been updated. Unsuitable categories include criminal investigations, cases stood behind a lead case, complaints without an underlying dispute for which ADR would add value, certain routine matters and disputes where litigation would clarify the law or a risk affects multiple customers

This Collection brings together guidance you should follow for Plastic Packaging Tax (PPT). It has been updated with links to new guidance on preparing to use a mass balance approach (MBA) for chemically recycled plastic.

PPT was introduced on 1 April 2022, with the aim of providing an economic incentive for businesses to use recycled plastic in plastic packaging manufactured in or imported into the UK. By increasing the demand for recycled material, the tax is intended to stimulate higher recycling rates and divert more plastic waste away from landfill or incineration.

At Autumn Budget 2024, the Government announced that, to support use of and investment in advanced chemical recycling technologies, businesses will be permitted to use an MBA to account for chemically recycled plastic used to make plastic packaging for the purposes of PPT.

Please also refer to:

• Preparing to use a mass balance approach for Plastic Packaging Tax
• Minimum certification requirements for a mass balance approach for Plastic Packaging Tax

This Guidance explains how to check what classifies as plastic, recycled plastic and packaging components, and if the packaging you manufacture or import is subject to the tax. The section 'Pre-consumer plastic' has been updated as pre-consumer plastic waste will not be accepted as a source of recycled plastic for the purpose of Plastic Packaging Tax from 1 April 2027.

For further information regarding PPT please contact Thomas Pegler.

This Guidance explains how to claim a customs duty waiver if you are bringing goods into Northern Ireland from Great Britain or countries outside the UK and EU which might otherwise be charged ‘at risk’ tariffs. Information about the need for an 'undertaking administrator' to log in to their Customs Duty Waiver Online Service account between 8am on 14 September 2026 and 25 September 2026 to confirm business details has been added.

Please also refer to Report payments and view your allowance for non-customs state aid and Customs Duty waiver claims.

This Guidance explains how to check time limits and how to claim for your circumstances as an importer, agent or express operator. Information has been added confirming that repayments of import duty and VAT can only be made to a UK bank account.

Please also refer to Claim back an import security deposit or guarantee.

For further information regarding Northern Ireland please contact Michael McNeil or Gerard Koevoets for global trade.

This Notice explains how to work out the VAT on building work and materials if you are a contractor, subcontractor or developer. HMRC has added ‘Electric vehicle charging points’ to the list of items in section 13.8.1 that can qualify for VAT zero-rating when supplied as part of qualifying construction work on new dwellings.

For further information please contact Ali Anderson.

This Notice provides details of HMRC's Extra Statutory Concessions in force at the time of publication. Section 3.14 has been updated as zero-rating of certain supplies of Free Zone goods is no longer possible.

UAE

The Federal Tax Authority (FTA) has issued Decision No. 13 setting out due diligence requirements that taxable persons must complete before deducting input VAT.

The Decision will come into effect on 1 October 2026. It provides detailed guidance on the practical application of the UAE VAT Law, under which the FTA will reject the deduction of input VAT if the supply, or supply chain, is related to tax evasion and the taxable person was aware, or should have been aware, of that connection.

The Decision establishes a framework of verification procedures that businesses must undertake before recovering input VAT. These procedures cover verifying suppliers, assessing supply arrangements, reviewing payment terms and the pricing conditions, documentation requirements and governance obligations.

The Decision also provides broader insight into the FTA's evolving compliance expectations by emphasising taxpayer governance and due diligence in assessing counterparties and transactions, rather than relying solely on documentary evidence to support VAT recovery.

Saudi Arabia

The Zakat, Tax and Customs Authority (ZATCA), in cooperation with the Economic Cities and Special Zones Authority, has issued a detailed procedural guide on tax and customs operations in Special Economic Zones (SEZs).

The guide aims to provide the necessary clarifications and guidance regarding the tax and customs procedures and provisions applicable to SEZs and licensed entities operating within them. It consolidates and explains the operation of existing SEZ regulations and outlines the practical application of tax incentives, customs suspension mechanisms, compliance obligations and administrative procedures.

The guide covers key areas including corporate income tax, withholding tax, VAT, customs duties, tax registrations, reporting obligations, customs procedures, inventory management requirements, transfer pricing and other tax considerations relevant to SEZ operations.

Businesses operating in, or considering operations in, Saudi Arabia's SEZs should assess the impact of the procedural guidance on their tax, customs, supply chain and compliance frameworks and ensure alignment with the requirements set out in the guide.

A five-year route-map to modernise Scotland’s land and property tax administration has been published by the Scottish Land Commission. The proposal focuses on improving land data, valuation systems, administrative coordination, and the testing of future tax reforms. The report notes that the Commission published advice in 2026 following Ministers’ commitments to consider options for a carbon land tax and options for tax to support wider land policy. It found that for reforms to be viable and effective, there are specific practical implementation issues that need to be addressed, including in the land data and tax administration system.

There are four priority areas:

• Better land data
  • Improve information on land ownership, land use and land value
  • Make tax decisions using more complete and up-to-date data
• Improved valuation system
  • Make it easier to carry out regular land and property valuations
  • Integrate valuation information with wider land data
• More joined-up administration
  • Improve coordination across bodies involved in tax administration
  • Develop digital infrastructure and adopt a more user-focused approach
• Innovation and testing
  • Model and test potential tax reforms before wider implementation
  • Build evidence on how different approaches might work in practice

The European Council has reported that final approval has been given for an “ambitious overhaul of the EU customs framework”.

Updated legislation aims to give the Union a more modern toolbox and new instruments to better facilitate global trade, especially in e-commerce, collect customs duties more efficiently and tighten controls on non-compliant, dangerous, or unsafe goods.

Managing the rise of e-commerce

The updated union customs code clarifies that non-EU e-commerce platforms will be considered the goods’ importer when selling into the EU and are therefore responsible for ensuring that all customs formalities and duty payments are handled, rather than the final EU consumer.

The legislation also features a new system of penalties for e-commerce operators that fail to fulfil their customs obligations, such as making sure that EU standards are upheld and appropriate duty paid. The most serious cases of non-compliance may incur fines of up to 6% of the company’s annual import value of goods in the preceding year, the removal of certain customs privileges and even access restrictions to online platforms.

Finally, to help cover rising costs from monitoring the growing number of small parcels entering the EU via e-commerce, an EU-wide handling fee on small parcels will be introduced by 1 November 2026. The Commission will set the level of the fee before it starts being applied by EU member states.

The handling fee is separate from the earlier Council decision to remove the historical customs duty exemption for imports valued at less than €150.

The EU customs authority

The text establishes a new decentralised EU agency for customs to coordinate governance of the customs union.

Specifically, the EU customs authority will analyse the constantly updated import and export data contained in a new, state-of-the-art, EU customs data hub – one central platform for importers and exporters to interact with customs in the EU. This will help member states to identify the riskiest cargo that should be prioritised for inspection.

The authority will also help establish priority control areas and risk criteria, and coordinate EU-level crisis management for customs. It will be located in Lille, France and begin operations in 2027.

Support for the most reliable traders

The new legislation creates a new category of the most transparent businesses – trust and check traders.

Under this scheme, companies providing comprehensive information on the movement and compliance of their goods, along with other stringent criteria, will enjoy simplified customs procedures, saving them time and money.

The most reliable companies will be able to release their goods into circulation in the EU without any active customs intervention at all.

The European Parliament is expected to approve the final text later in September, ahead of its signature and publication in the EU’s official journal. Use of the new data hub to record imports to and exports from the EU will become mandatory for e-commerce businesses on 1 July 2028 and for all traders from 1 March 2034.

For further information regarding global trade please contact Gerard Koevoets or Shenshen Lin.

The European Commission has reported new figures from Member States which demonstrate that businesses continue to make increasing use of the simplified VAT rules for online sales. Five years after the EU’s VAT e-commerce rules entered into force, the latest figures also show continued growth in VAT declared through the One Stop Shop (OSS) and Import One Stop Shop (IOSS) schemes.

The VAT e-commerce package, which entered into force on 1 July 2021, marked a major step in modernising the EU VAT framework. Since then, Member States have collected more than €125 billion in VAT revenue through the EU’s VAT e-commerce schemes.

In 2025 alone, more than €38 billion in VAT revenue was collected, an increase of 17% compared with the previous year. The number of businesses using the EU’s simplified VAT schemes has also continued to grow. By the end of 2025, more than 193,000 businesses had registered to account for VAT on online sales through the schemes, reflecting the continued uptake of the EU’s VAT reforms, which aim to help simplify VAT compliance, reduce red tape and ensure VAT collection.

The European Commission press release is available here.