Weekly VAT News

The Chancellor of the Exchequer, Rachel Reeves, delivered her Budget on 26 November.

We have summarised the key indirect tax announcements below.

All indirect tax updates below are taken from the links provided and:

• Supporting documents for Budget 2025
• Budget 2025 tax related documents
• Budget 2025 document
• Budget 2025
• Budget 2025: Overview of tax legislation and rates (OOTLAR)

There was no change announced to the main VAT rates. Further, the Government has decided not to cut VAT on domestic energy bills which reflects both the high cost of such a measure and its limited contribution to the broader decarbonisation agenda. Instead, the Government has chosen to focus on reducing electricity bills by removing some policy levies paid by utilities and shifting their funding to general taxation. This approach should encourage greater use of electricity over gas.

Summary of key indirect tax announcements

E-invoicing – implementation date announced – Budget 2025 confirms that the Government will require all VAT invoices to be issued in a specified electronic format from April 2029. The Government will work with stakeholders to develop an implementation roadmap to be published at Budget 2026.

Please also refer to Promoting electronic invoicing across UK businesses and the public sector.

Comments: With significant markets going live with e-invoicing legislation in 2026 including Belgium, Poland, France and Greece across Europe alone, this does show HMRC’s desire to stay aligned with other markets. The Government has explicitly recognised the important role e-invoicing will play in supporting HMRC’s digitalisation goals over the coming years as well as its ability to reduce the VAT gap. The announcement follows a successful initial consultation earlier this year and reflects that HMRC is continuing to see the progress and benefits of e-invoicing in other major economic markets. Whilst not meeting Malaysia’s implementation record of two years, HMRC’s timelines align to those of other major markets who typically move from initial consultation to formal legislation in between 3 and 5 years. An implementation roadmap is expected to be published at Budget 2026 and businesses will need to be ready to engage, review data quality and gain appropriate stakeholder engagement in the business.

For further information please contact Chris Taylor.

Revised VAT grouping rules and the Skandia judgment – From 26 November 2025, HMRC is reverting to unconditional whole entity cross-border VAT grouping. This change reflects a revised interpretation of existing UK VAT law and does not require legislative amendment. This Revenue and Customs Brief replaces: Revenue and Customs Brief 2 (2015), Revenue and Customs Brief 18 (2015) and Revenue and Customs Brief 23 (2015). HMRC now considers that an overseas establishment of a business VAT-grouped in the UK should be treated as part of that VAT group, even when located in an EU member state that does not operate whole entity VAT grouping. HMRC acknowledges that some VAT groups may have accounted for VAT in line with the previous guidance and may now be eligible to reclaim overpaid VAT through the error correction notification procedure.

For further information, please contact Simon Harris.

Reforming the customs treatment of low value imports into the United Kingdom – This consultation will close on 6 March 2026 and announces the removal of the £135 customs duty relief for low-value imports (LVI’s) and seeks views on certain elements of a new set of customs arrangements for these goods.

Currently, LVIs with a value of £135 or less being imported into the UK can claim a customs duty relief. VAT is due on these goods following reforms in 2021.

Following a significant increase in LVI volumes over recent years, the Government has reviewed the existing customs arrangements for LVIs and concluded that these require reform. At Autumn Budget 2025, the Chancellor announced the removal of the relief from March 2029 at the latest.

This consultation covers the design of the new arrangements, including what data to collect, how the tariff should be applied, whether to apply an additional fee on LVIs to fund administration, and potential changes to VAT collection to reflect the new arrangements.

For further information please contact Gerard Koevoets.

Tax Treatment of Remote Gambling – HM Treasury has published the outcome of this consultation which closed on 21 July 2025. The consultation sought views on the scope of the proposed new tax, covering all remote betting and gaming activities (such as online casinos, bingo, slots, sports betting and horserace betting).

It has been noted that remote betting and remote gaming have distinct characteristics and levels of harm associated with them. Recognising this, the Government will not introduce a new single remote gaming and betting duty. Instead, it will continue to reflect these differences by maintaining different rates for remote gaming and remote betting:

• Remote gaming: From April 2026 Remote Gaming Duty will increase from 21% to 40%.
• Remote betting: From April 2027 a new Remote Betting Rate within General Betting Duty set at 25% will be introduced. Remote UK horseracing bets will not be subject to the new rate and will remain taxed at 15%.
• The Government will support bingo halls by abolishing Bingo Duty from April 2026.
• The Government is not making changes to any of the other gambling duties.

Please also refer to Changes to Gambling Duties – this tax information and impact note covers the aforementioned changes to Gambling Duties.

Also, The Gross Gaming Yield bandings for gaming duty will be frozen from 1 April 2026 until 31 March 2027.

For further information, please contact Elliott Lomas or Andy Jones.

VAT treatment of business donations of goods to charity – HM Treasury has published the outcome of this consultation which closed on 21 July 2025.

The Government sought views on the design of a VAT relief on business donations of goods to charity for distribution to those in need or use by the charity in the delivery of their services.

The Government recognised the current VAT rules, which relieve VAT on goods donated to charity for sale (for example through a charity shop), but not for onward donation or the delivery of the charity’s services, are not aligned. These rules were designed to protect against fraud in the VAT system.

Through the consultation, the Government aimed to explore options to align the rules without compromising the security of the VAT system. Also to better understand the different types of operating models used by businesses and charities which would be impacted, as well as gather views on the scope of a relief, particularly eligible goods, and the design of its administration, among other topics.

The Government has recognised the strong support from stakeholders for the objectives of the proposed relief and will legislate to introduce a targeted VAT relief on such donations. This relief will be designed to encourage the reuse of surplus goods and support the UK’s transition towards a more circular economy.

The summary of responses provides a detailed analysis of stakeholder views and the Government's response to various points made regarding:

• The objectives of the proposed relief
• The types of goods that might be eligible
• Which recipient organisations (and the purposes for which they receive goods) should qualify
• Administrative arrangements necessary to support the relief, including record-keeping, certification and compliance

The new VAT relief for business donations of goods to charity will come into force on 1 April 2026 following Royal Assent of Finance Bill 2025-26. HMRC will publish detailed guidance for businesses and charities on how to use the relief and comply with the associated requirements.

• The response does not explicitly set out the mechanism by which the relief would be provided, but we would expect it to be by way of an extension of the zero-rate (which is consistent with the relief currently available for donations of goods to charity where those goods are to be let, sold or exported by the charity).
• In order to reduce the risk of abuse, there will be a standard value limit of £100 per item and a higher £200 limit for a specified list of essential goods (examples cited in the response include white goods and furniture). To further reduce the risk of abuse, certain goods subject to excise duty will be excluded.
• Only donations to charities registered with HMRC for tax purposes and, where required, the relevant UK regulator are expected to be eligible; CICs and unregistered charities are to be excluded.
• The starting point for valuation will be a cost-of-goods-sold basis but there is expected to be scope for a lower valuation where, for example, goods are old, second-hand or of reduced value (e.g., due to damage).

Please also refer to Removing VAT on donations of eligible goods from businesses to charities.

For further information, please contact Andy Jones.

Fuel duty: 2026-27 main rates – The Government will extend the temporary 5p fuel duty cut for a further five months, with the cut being reversed in three stages: 1p on 1 September 2026, 2p on 1 December 2026 and 2p on 1 March 2027. This will return rates to pre-March 2022 levels. The planned inflation increase for 2026-27 will not take place, with the Government uprating fuel duty rates in line with the Retail Prices Index (RPI) from April 2027.

Introduction of Electric Vehicle Excise Duty (eVED) – EVED, a new mileage charge for electric and plug-in hybrid cars, will take effect from April 2028. This consultation sets out details on how eVED will work and seeks views on its design and implementation. The consultation will close on 18 March 2026.

It is proposed that the rate of tax will be 3 pence per mile for fully electric cars and 1.5 pence per mile for Plug in Hybrid Vehicles (as these will continue to pay fuel duty on miles driven in petrol mode).

Vehicle Excise Duty for expensive car supplement threshold increase for zero emission vehicles – The Government will increase the Vehicle Excise Duty Expensive Car Supplement threshold to £50,000 for zero-emission vehicles only. This change will take effect from 1 April 2026 and will apply to ZEVs registered from 1 April 2025 onwards.

Vehicle Excise Duty for cars, vans and motorcycles – The Government will uprate Vehicle Excise Duty rates for cars, vans and motorcycles in line with RPI from 1 April 2026.

Vehicle Excise Duty for heavy goods vehicles (HGVs) and the HGV levy – The Government will uprate Vehicle Excise Duty for heavy goods vehicles (HGVs) in line with the RPI from 1 April 2026. The government will also uprate the heavy goods vehicle levy in line with the RPI from 1 April 2026.

Vehicle Excise Duty (VED) exemption for search and rescue vehicles – The Government will exempt search and rescue vehicles from VED and will work with stakeholders to design and implement an exemption from April 2027.

For further information, please contact Richard Norman.

VAT Treatment of Private Hire Vehicles – HM Treasury has published the outcome of this consultation which closed on 8 August 2024.

The consultation considered the potential tax impacts of the Uber Britannia Limited v Sefton Borough Council High Court judgment that was handed down on 28 July 2023, and the Uber London Limited v Transport for London High Court judgment that was handed down on 6 December 2021, on the private hire vehicle (PHV) sector and its passengers.

In response to the consultation, the Government will not amend VAT legislation to allow PHV operators to act as agents for tax purposes in all cases, nor will it introduce a new margin scheme or reduced rate for the sector.

The government will legislate to exclude suppliers of private hire vehicle and taxi services from the Tour Operators’ Margin Scheme, except where these are supplied in conjunction with certain other travel services.

The Government will keep legislation relating to taxis and PHVs under review, in order to ensure that customer safety is prioritised alongside a fair market for firms of different types and in different places.

Please also refer to Revenue and Customs Brief 8 (2025): VAT Tour Operators’ Margin Scheme – supplies by private hire vehicle or taxi operators – this brief explains the implications for private hire vehicle operators and taxi operators and guidance on the legislation the Government will introduce taking effect from 2 January 2026.

Also, Tour Operators’ Margin Scheme: change in legislation for Private Hire Vehicle Operators.

For further information, please contact Mitchell Moss.

Digital Services Tax Review – This Policy Paper explores the implementation of the Digital Services Tax (DST) to date focusing on the performance, administration and impacts of the tax. The DST is an interim measure in response to the challenges posed by the digitalisation of the economy to the international corporation tax system. The UK’s position remains to remove the DST once an appropriate global solution that would address these challenges is in place.

For further information, please contact Liam Smith.

VAT and Insurance Premium Tax: change to reliefs for qualifying motor vehicle leasing schemes – This tax information and impact note is about changes to VAT and Insurance Premium Tax reliefs on motor vehicle leases under qualifying schemes for disabled users.

These measures will apply the standard rate of VAT to top-up payments on leases of motor vehicles through qualifying schemes for the use of disabled people. Where payments are made through benefits, VAT will continue not to apply.

Insurance Premium Tax will apply at the standard rate of 12% to insurance on new vehicle leases through qualifying schemes.

These measures take effect from 1 July 2026.

Alcohol Duty: rates change – This tax information and impact note provides details on changes to alcohol duty rates.

This measure increases the Alcohol Duty rates by Retail Price Index (RPI) inflation across all alcoholic product categories – in addition, the simplified duty rates used for calculating duty on alcoholic products brought into GB in excess of the travellers’ allowance will also rise. The measure also increases the cash discounts provided to small producers which maintains the relative value of Small Producer Relief (SPR).

This measure takes effect from 1 February 2026.

Tobacco Duty: rate changes – This measure increases the duty rate on all tobacco products.

On 26 November 2025 rates were increased by the Tobacco Duty escalator of 2% above the Retail Price Index.

On 1 October 2026 rates will increase by the Tobacco Duty escalator of 2% above the forecasted Retail Price Index, plus an additional £2.20 per 100 cigarettes or £2.20 per 50g on all other tobacco products.

Legislation will be introduced in Finance Bill 2025-26.

Please also refer to Rates and allowances for Tobacco Products Duty and Simplified rates for bringing personal goods into the UK.

Duty free allowances – vaping products – A duty free allowance of 50ml per passenger for vaping products will be introduced in October 2026, alongside moving cider and sparkling wine into the beer and still wine duty free categories, respectively.

Introduction of Vaping Duty Stamps Scheme on 1 October 2026 – From 1 October 2026, the Vaping Duty Stamps scheme requires all vaping products manufactured or imported into the UK to have a duty stamp fixed to final retail packaging.

Businesses will be able to register for the scheme from 1 April 2026.

Introduction of Vaping Products Duty from 1 October 2026 – This measure introduces Vaping Products Duty (VPD) which is a new excise tax on vaping products.

It applies to any vaping liquid that contains nicotine and includes glycerine, glycol, or both, as well as any liquid intended for vaporisation in a vape device that is not classified as a medical or tobacco product.

The duty will be charged on vaping products manufactured in or imported into the UK at a flat rate of £2.20 per 10 millilitres of vaping liquid, regardless of how much nicotine is contained in the product.

Primary legislation is included in Finance Bill 2025-26. Secondary legislation is anticipated to be laid in March 2026 to set out further details. The duty will take effect from 1 October 2026, with registrations opening on 1 April 2026.

Refunds of VAT for Combined County Authorities – This measure will add Combined County Authorities to the list of bodies eligible for refunds, under section 33 of the VATA94.

Local government bodies can claim a refund of VAT incurred on purchases of goods and services made to support their statutory non-business activities, if they’re on the list of eligible bodies or they have been added by individual Treasury Orders once they’ve been established.

By adding Combined County Authorities to the list, they will no longer need individual Treasury Orders to be eligible for VAT refunds under section 33.

The measure will have effect from the date of Royal Assent to Finance Bill 2025-26 and will have effect in relation to purchases and imports taking place on and after 1 December 2025.

VAT treatment of land intended for social housing – The Government will shortly consult on the reform of VAT rules to incentivise the development of land intended for social housing.

Inland border facilities: changes to port approvals legislation – This measure amends HMRC’s existing powers to approve ports and apply approval conditions in secondary legislation. This includes the provision of customs infrastructure. Ports assessed as not having enough space on-site for customs infrastructure will need to provide the same infrastructure at an offsite inland border facility (IBF), which must be agreed by HMRC.

This measure will have effect from the date of Royal Assent to Finance Bill 2025-26. It will not have any immediate effects on IBF beneficiary border locations. Further secondary legislation, which will affect IBF beneficiary ports, is planned for spring 2026.

Reform of Air Passenger Duty for private jets – HM Treasury has published the outcome of this consultation which closed on 22 January 2025.

The consultation sought views on a proposal to extend the scope of the higher rate of Air Passenger Duty (APD) to all private jets, including business jets. This was driven primarily by the Government’s commitment to ensuring that operators and passengers of such aircraft contribute fairly to the public finances. When APD was extended to private jets in April 2013, the higher rate was also introduced for the larger private jets, reflecting the higher class of service they provided. Through this consultation, the Government aimed to assess whether the higher rate could be further aligned to its objectives, including whether the rate’s scope based on aircraft weight and passenger capacity remains appropriate.

The Government has confirmed that from 1 April 2027, it will extend the scope of the higher rate of APD to cover all private jets above 5.7 tonnes. This document also clarifies how the higher rate will be defined in legislation, and sets out the next steps, including plans to publish draft legislation ahead of implementation from April 2027.

For further information, please contact Saleena Beedassy.

Climate Change Levy: electrolytic hydrogen and energy context – HM Treasury has published the outcome of this consultation which closed on 7 May 2025.

At Spring Statement 2025, the Government committed to remove Climate Change Levy (CCL) costs on electricity used in electrolysis to produce hydrogen. The consultation sought to establish the best legislative route to implement this, as well as to seek views to inform the scope of a wider review of the CCL.

The Government has confirmed that electricity used in electrolysis to produce hydrogen as well as natural gas as a source of CO2 to produce sodium bicarbonate will be added to the CCL non-fuel use exemption. This will be implemented via an affirmative SI. Subject to parliamentary approval, the Government aims for these legislative changes to be in force by Spring 2026.

The Government has advised that it is committing to consider the broader treatment of the production and supply of hydrogen as part of the CCL wider review, recognising interest from the hydrogen sector in a broader relief. Beyond these changes, the Government remains committed to the wider review of the CCL and will update on next steps in due course.

For further information, please contact Richard Norman.

Reform of Landfill Tax – HM Treasury has published the outcome of this consultation on proposals for reform of the tax, which closed on 21 July 2025.

The summary of responses sets out the decisions on all the proposals included in the consultation. The Government has confirmed that it will not proceed with transitioning to a single rate of tax by 2030, and will retain the exemption for quarries with disposal permits. 

Please also refer to Rates and allowances for Landfill Tax. HMRC has updated the Landfill Tax rates (standard rates and lower rates) in the table in the section 'How the tax is charged' and Check if you need to pay Landfill Tax. Please also refer to Landfill tax rates for 2026 to 2027.

For further information, please contact Mitchell Moss.

Aggregates Levy: devolution to Scotland – This measure makes legislative changes to the Aggregates Levy in preparation for devolution. It makes aggregates producers, who supply taxable aggregates across the Scottish border in either direction, responsible for paying tax in the destination country.

Please also refer to The Scottish Aggregates Tax (Administration) Regulations 2025.

The changes will apply on and after 1 April 2026.

Plastic Packaging Tax – mass balance approach and removal of pre-consumer plastic – This measure comes into effect from 2027. For the purpose of Plastic Packaging Tax it introduces a mass balance approach (MBA) to account for chemically recycled plastic attributed to making plastic packaging and removes pre-consumer waste as a source of recycled content.

The introduction of an MBA to account for chemically recycled plastic aims to help to create the right fiscal conditions for investment in the emerging chemical recycling sector and support innovation in the UK plastics sector.

Extended Producer Responsibility (pEPR) – The Government will consult in early 2026 on proposals to measure the performance and effectiveness of local authorities’ use of pEPR fees and appointing a Producer Responsibility Organisation by March 2026 to give industry a central role in operating the scheme. The government will also consult on reforms to the Packaging Waste Recycling Note system.

Draft legislation: Carbon Border Adjustment Mechanism – HMRC has published the outcome of this consultation which closed on 3 July 2025.

This was a technical consultation on draft primary legislation for the carbon border adjustment mechanism. The draft legislation outcome document sets out key changes to the primary legislation following the technical consultation and the decision to delay the inclusion of indirect emissions from the scope of the CBAM at its implementation on 1 January 2027.

Please also refer to:

• Introduction of Carbon Border Adjustment Mechanism
• Factsheet: Carbon border adjustment mechanism

Tackling tax adviser facilitated non-compliance – This policy paper provides details regarding measures which introduce legislative changes designed to strengthen HMRC’s ability to deter and respond to tax adviser behaviour that intentionally facilitates non-compliance.

The measure includes:

• Changes allowing HMRC to request information from tax advisers where there is reasonable suspicion of sanctionable conduct
• Penalties for tax advisers who engage in sanctionable conduct, calculated based on the tax loss
• A new power allowing HMRC to publish details of advisers where they have been sanctioned

The measure is part of a wider package to raise standards in the tax advice market and reduce the tax gap.

The measures will take effect from 1 April 2026. Legislation will be introduced in Finance Bill 2025-26 to amend schedule 38 of Finance Act 2012.

Tackling promoters of marketed tax avoidance – These measures will make a number of changes to the current legislation that targets those who promote or enable marketed tax avoidance.

New powers will introduce a ban on promoting avoidance arrangements that have no realistic prospect of success and a power to allow HMRC commissioners to specify further arrangements in regulations which may not be promoted, with penalties and a criminal offence for non-compliance.

The proposals will have effect at and after Royal Assent to Finance Bill 2025-26.

Reporting serious tax avoidance or evasion – The Government has launched a Strengthened Reward Scheme for individuals who report serious tax avoidance or evasion.

Penalty reform: Updates to the penalty regime for Self Assessment and VAT – The government will not apply late submission penalties for quarterly updates during the 2026-27 tax year for Income Tax Self Assessment (ITSA) taxpayers required to join Making Tax Digital (MTD). The government will apply the new penalty regime for late submission and late payment to all ITSA taxpayers not already due to join the new system from 6 April 2027. This will be legislated for via secondary legislation. The government will increase the penalties due for late payment of ITSA and VAT from 1 April 2027. This will be legislated for via secondary legislation.

Behavioural penalties reform – The Government has published a summary of responses to the consultation ‘Reform of behavioural penalties’, which explored ways to modernise HMRC’s penalties for inaccuracies and failures to notify. Respondents generally favoured simplifying the legislation around inaccuracy and failure to notify penalties, and improving the existing regime rather than introducing a new penalty structure. HMRC has confirmed it intends to take this feedback on board, with a focus on reducing legislative complexity and improving its role in supporting compliance. The intention is to enhance the current penalty model, not to replace it, though HMRC is still considering how best to achieve these improvements. HMRC also plans to strengthen sanctions for taxpayers who seek to evade tax.

VAT and Deposit Return Schemes (DRS) – The Government will simplify administration of the DRS by removing the requirement for individual producers to account for VAT on unreturned deposits. Instead, this will be done by the Deposit Management Organisation.

For further information, please contact Helen Jamieson.

Tax Update event – The Government will announce further changes to simplify and improve tax and customs administration at a Tax Update event in early 2026.

Tariff suspension extension – The Government will maintain tariff-free imports until 31 December 2026 to avoid unnecessary costs for businesses while a review of possible further extension takes place. This measure will extend tariff suspensions on goods ranging from aluminium frames used by UK manufacturers, to ingredients used by UK food producers. The Government has opened an application window for businesses to apply for new suspensions.

For further information, please contact Ross Freeman.

Uncertain tax treatments – A consultation will launch in early 2026 to enhance the notification regime for uncertain tax treatments.

Construction Industry Scheme – The Government will publish regulations for technical consultation aimed at simplifying and improving the administration of the scheme. This will be legislated for in Finance Bill 2025-26 and take effect from 6 April 2026.

Tax transparency on real estate – The UK intends to participate in a new international agreement which will tackle tax evasion by providing for the automatic exchange of readily available information on real estate from 2029 or 2030.

Use of third-party data – The Government will acquire third party data more frequently for interest income and card sales from April 2028. This will be legislated for in Finance Bill 2025-26.

Visitor Levy in England – The Government is giving Mayoral Strategic Authorities in England the power to create local overnight visitor levies.

The consultation is seeking views on the design of the new power including:

• Whether Foundation Strategic Authorities should also have the power to create overnight visitor levies
• How any revenues collected should be used
• The types of accommodation that will and will not be included
• How levy rates should be calculated and the powers Strategic Authorities have to change them
• What Strategic Authorities need to do to introduce a levy and to change it
• Liability for the levy and how this will be assessed
• The administrative framework for overnight visitor levies, including options to minimise regulatory requirements
• Equalities impacts

This consultation will close on 18 February 2026.

Advance tax certainty for major projects – In March 2025, the Government launched a consultation on providing advance tax certainty for major projects. The consultation set out how a new process could work to support UK investment decisions and asked for taxpayers’ views on their priorities.

At Autumn Budget, the Government published its response to the consultation, confirming that it will introduce a new ‘Advance Tax Certainty Service’ and setting out details of how it will operate, including:

• Eligibility – the Government has decided to set the financial threshold for eligibility for the service at £1bn. This is on the basis that these projects represent the largest and most significant investments in the UK, with the biggest impact on economic growth. The threshold will be based on ‘in scope expenditure’ over the lifetime of the project, ‘in-scope’ expenditure is defined as all project expenditure incurred in the UK less any financing costs or expenditure related to the acquisition of share or ownership interests in other businesses or entities. The Government recognises that there will be projects that will not meet this threshold, and states that it will consider lowering the threshold as part of a review of the performance of the service when it has been in operation for 12 months.
• Taxes in scope: Issues or queries relating to Corporation Tax, VAT, Stamps, PAYE and the Construction Industry Scheme will be included. However, Advance Certainty Clearances will not be offered on transfer pricing issues, purpose tests, or hypothetical scenarios.
• Nature of clearance: The clearance will bind the Government against changing its interpretation of the law, but not against a change in case law and/or changes in legislation. Clearance will not be provided on any area of law that is subject to current change (such as going through a court process).
• Process: The Government encourages early engagement with the process. Its ‘ambition’ is for a 90-day turnaround time on applications. When an application has been submitted, HMRC will hold a formal scoping meeting with the customer. Clearances will not be published.

Legislation to implement the new service will be included in Finance Bill 2025-26. HMRC will publish technical guidance alongside the Finance Bill. The service will launch in July 2026, meaning that from July, taxpayers that are considering an investment project and believe they meet the entry requirements can apply for the service.

Electronic sales suppression – A call for evidence will be published in 2026 on the introduction of software standards for the electronic and mobile point of sale sector to tackle electronic sales suppression and cash facilitated tax evasion.

We are delighted to invite you to join us for our webinar in conjunction with Vertex on Wednesday 10 December, 14:00-14:45, where we will explore recent changes in tax rules and reporting requirements for e-commerce and marketplace businesses.

This is the first webinar in a series where we will discuss:

• How digital business models have evolved and what that means for tax
• Common challenges for e-commerce and marketplace businesses
• Why automating tax determination and reporting is becoming essential
• Practical steps to reduce tax compliance risk and support international growth

This will be particularly insightful for:

• Tax and Finance leaders in digital goods/services businesses
• E-commerce directors and marketplace business leaders
• Anyone looking to simplify tax compliance and scale confidently

Secure your spot now to gain insights, practical strategies, and actionable steps to stay compliant. For further information on how to register please contact Ruby Buckland. You can also contact EY’s Gaurav Patney who will be speaking at the event.

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

In this edition we provide updates on US trade policy, the CPTPP-ASEAN Trade and Investment Dialogue, EU reforms to its Regulation on Deforestation-free Products (EUDR), and the UK’s Budget announcements and Critical Minerals Strategy.

For further information please contact Marc Bunch, Ross Freeman, Will Main or Vikita Vaghela.

The findings for the 2025 EY Tax and Finance Operations Survey have launched.

Our survey of 1,600 tax and finance professionals reveals one very clear takeaway: 86% of tax and finance leaders now prioritise leveraging data, GenAI and technology. Tax and finance functions are experiencing major shifts as leaders leverage AI-driven tools and advanced data capabilities to move beyond routine tasks and focus on delivering insight-led decisions. The survey explores this and other issues relating to talent, legislative and regulatory change, managed services, operating model effectiveness and business change.

Topics – VAT Exemption – Credit Intermediaries

T-657/24 Versãofast

On 26 November 2025 the Court of Justice of the European Union (CJEU) released its decision in this Portuguese referral asking whether Article 135(1)(b) of the VAT Directive, as regards the expression ‘negotiation of credit’, applies to the provision of services aimed at attracting mortgage loan customers for a credit institution by a taxable person – a tied credit intermediary – which is incorporated and operates in accordance with the legal framework governing access to and performance of the activities of a credit intermediary?

Versãofast (VUL) is authorised as a mortgage broker, holds a licence issued by the Banco de Portugal in the category of credit intermediary and is tied to several banks. VUL is authorised to provide intermediary services which include: the presentation or proposal of credit agreements to consumers, the provision of assistance to consumers by carrying out preparatory or other pre-contractual management tasks in relation to credit agreements that are not presented or proposed by VUL itself, and the conclusion of credit agreements with consumers on behalf of creditors, as well as the provision of advisory services.

VUL concluded an agreement with Caixa Geral de Depósitos, SA (CGD) for the provision of credit intermediation services, on an independent basis and with full technical autonomy. The agreement provided that VUL could not conclude credit agreements with consumers on behalf of CGD.

CGD undertook to pay a commission to VUL calculated as a percentage of the volume of credit agreements actually contracted. The determination of the commission also included a quality indicator that weighed the degree of preparation of credit files achieved by VUL and the number of complaints.

VUL also concluded similar agreements, with the same purpose and method of remuneration (determined as a percentage of the contracted credit), with other credit institutions that are competitors of CGD.

Essentially, VUL finds and attracts consumers in need of a mortgage through the REMAX distribution channel/network. Initial contact is made with potential borrowers to learn about their circumstances, including the nature of their activities, the remuneration they receive and their nationality. In that context, consumers are asked several key questions, the answers to which are essential in enabling VUL to determine whether they are eligible for bank financing.

In the initial approach to consumers, VUL asks for a series of documents based on a ‘checklist’ of relevant information required to manage the credit application file to be submitted to the banks. VUL carries out an initial analysis of the documentation to check that it is in order and up to date. If the documentation is acceptable, it sends it to various banks to obtain loan proposals. The banks respond to requests for proposals within 24 to 48 hours by submitting loan proposals indicating all relevant conditions, VUL then draws up a comparative table (of spreads, rates, etc) and presents the proposals received to the customers, either in person or electronically, explains their content, discusses them with the customers and clarifies any doubts that might arise.

VUL provides objective information and does not advise consumers to take out a credit agreement contract with one bank rather than another. VUL informs the consumer of the bank’s final decision on whether to approve the credit agreement.

VUL asserts that its services to CGD (which constitutes the basis of VAT corrections made by the tax authorities and subject to this referral) do not fall within the scope of the VAT exemption provided by domestic legislation.

It considers that its services consist in presenting and explaining the brochures and conditions of the bank’s credit agreements to potential customers. It also provides that service to other banks. It cannot advise that one credit agreement be concluded rather than another, and must confine its activities to providing unbiased, objective information to interested potential customers.

It does not in any way analyse the information collected from potential customers and it is for the banks, in this case CGD, to analyse the profiles of the customers and make a decision as to whether to grant the credit and the associated conditions. It is not permitted under any circumstances to enter into credit agreements on behalf of the bank.

VUL argues that the term ‘negotiation of credit’ implies the involvement of the credit intermediary in the approval of the credit and in the terms and conditions laid down for that purpose, circumstances that are not present in this case. The transactions in question should therefore be subject to VAT with a corresponding right to deduct VAT on costs etc.

In disagreement, the tax authority considers that VUL, in its capacity as a credit intermediary (in this case, a mortgage broker), is duly authorised by the Banco de Portugal to carry out that activity and provides intermediation services to various financial institutions.

The contracts concluded with the various banks have a similar purpose, to present credit agreements to consumers and provide them with assistance, and all provide for a ‘success’ fee depending on the volume of credit intermediated. The contractually agreed services of presentation of the financial product to consumers and those associated with providing assistance to consumers are inseparable in terms of the objective pursued, which is the conclusion of a credit agreement, and go far beyond the mere presentation of the bank’s credit product to potential customers. The indissociable nature of those services is also reflected in the method used to calculate the corresponding remuneration, which is fixed in a unit-based, inseparable manner for the provision of the service, without distinguishing between its components.

In conclusion, the tax authority considers that VUL’s entire activity is exempt without the right to deduct input tax.

The CJEU recalled that Article 135(1)(b) provides for exemption for the ‘negotiation of credit’. The exemptions referred to in Article 135(1) are autonomous concepts of EU law intended to avoid divergences in the application of the VAT system from one Member State to another, which must therefore be interpreted uniformly throughout the territory of all the Member States. Also, the terms used to designate the exemptions referred to in Article 135(1) must be interpreted strictly, given that they constitute derogations from the general principle that VAT is to be levied on all services supplied for consideration by a taxable person.

The Court has previously considered the concept of 'negotiation', finding that it covers an activity carried out by an intermediary who does not occupy the place of a party to a contract and whose activity is different from the typical contractual services provided by such a person. The activity of negotiation is a service provided to a party to a contract and remunerated by that party as a separate intermediary activity.

The Court has also held that intermediary activities, which consist in the search, in return for payment of remuneration, for purchasers for immovable property which has subsequently been sold and disposed of in return for transfers of shares, without the intermediary having an interest of its own in the content of those contracts, are activities which correspond to the term 'negotiation' relating to shares in companies or associations, within the meaning of Article 135(1)(f) of the VAT Directive.

Considering the concept of 'credit negotiation', the CJEU noted that the Court has held that the application of the exemption provided for by Article 135(1)(b) cannot depend on the existence of a contractual link between the provider of the trading service and a party to the credit agreement, but must be assessed in the light of the actual nature of the service provided and its purpose. Also, the fact that the terms of the credit agreement have been laid down in advance by one of the parties to the agreement cannot prevent, as such, the provision of a negotiation service.

In the immediate case, whilst some of the services of the kind provided by VUL, such as making available to customers brochures provided by credit institutions or receiving replies from those institutions to credit applications, could be considered material, technical or administrative services, those services, taken as a whole, are in principle intended to ensure that a credit institution, in this case CGD, concludes credit agreements with potential customers. Such an objective is also apparent from the method of remuneration for those services, which is based on the actual conclusion of credit agreements, VUL being remunerated by the credit institutions on the basis of the amount of the credit agreements concluded through its mediation and the quality of the services provided, in particular the quality of prepared files.

The CJEU considered that the fact that the terms of the credit agreements have been laid down in advance by one of the parties to the agreements cannot prevent, as such, the provision of a credit negotiation service. The lack of influence of VUL, as the credit intermediary, on the content of the credit offer has no bearing on the classification of the activities of VUL as a credit intermediary. The same is true of the fact that VUL does not have the power to act in the name and on behalf of the credit institutions.

The CJEU also noted that the classification of VUL’s services cannot be called into question by the fact that customers remain free to conclude, or not to conclude, a credit agreement and to choose the credit institution with which they will conclude the agreement. A credit negotiation may be limited to putting two parties in a position to conclude a credit agreement on their own. The activity exempted under Article 135(1)(b) does not imply, for the potential parties to a credit agreement, a restriction of their contractual freedom.

In summary, Article 135(1)(b) must be interpreted as meaning that the exemption it provides for credit negotiation operations applies to the activities of a credit intermediary who seeks out and approaches customers to offer them credit agreements, who assists them by carrying out work prior to the conclusion of the agreements, who is responsible for communication with credit institutions and who is remunerated by these institutions according to the amount of the credit agreements concluded through the intermediation. This is despite the fact that it has neither the power to act on behalf of the credit institutions nor any influence on the content of the credit agreements and that customers remain free to decide whether or not to conclude an agreement and to choose the credit institution with which they will conclude the agreement.

For further information please contact Simon Harris.

Topics – Tour Operators Margin Scheme – negative margin

C-565/24 P-GmbH & Co. KG (Voyages-café)

On 27 November 2025 the Court of Justice of the European Union (CJEU) delivered the opinion of Advocate General Szpunar (AG) in this German referral asking 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.

In essence this referral concerns the special VAT scheme for travel agents (Tour Operators Margin Scheme (TOMS)) and whether that scheme should apply in the situation where a taxable person provides tourist services at a loss and therefore does not generate added value from those services, but its business is profitable thanks to the sale of goods combined with those services.

From 1997 to 1999, P-GmbH & Co (PG), a company incorporated under German law, organised excursions combined with the sale of goods, commonly referred to as ‘coffee trips’. The excursions involved transporting the participants by bus to various tourist attractions, where they would receive a meal and possibly participate in an additional tourist programme, but primarily they would participate in sales events during which they could purchase a variety of goods sold by PG.

PG purchased transportation services from other taxable persons and offered those services in its own name to its customers. A fee was paid to participate in the excursion, but that fee did not fully cover the costs that PG incurred in connection with the purchase of the transportation services. The remainder of those costs, as well as the costs of other services which were free of charge to the participants, were covered by PG using revenue from the sale of goods. Gradually, more and more excursions were offered to participants completely free of charge, and all the costs were covered by revenue from the sale of goods.

PG taxed its activities under the general rules, exercising the right to deduct all tax paid on services purchased from other taxable persons. Following a tax audit, PG’s right to deduct transportation costs was only recognised with respect to those excursions for which PG did not charge any fees to participants. With regard to those excursions for which PG charged participants a fee to cover part of the cost of the transportation service, the Lower Saxony Finance Court found that the transportation service fell under TOMS, and therefore PG had no right to deduct the tax it had paid when purchasing that service from other taxable persons.

Article 26 of Directive 77/388 provided for TOMS – Member States shall apply VAT to the operations of travel agents in accordance with the provisions of this Article, where the travel agents deal with customers in their own name and use the supplies and services of other taxable persons in the provision of travel facilities. This Article shall not apply to travel agents who are acting only as intermediaries and accounting for tax in accordance with Article 11A(3)(c). In this Article travel agents include tour operators.

All transactions performed by the travel agent in respect of a journey shall be treated as a single service supplied by the travel agent to the traveller. It shall be taxable in the Member State in which the travel agent has established his business or has a fixed establishment from which the travel agent has provided the services. The taxable amount and the price exclusive of tax, within the meaning of Article 22(3)(b), in respect of this service shall be the travel agent’s margin, that is to say, the difference between the total amount to be paid by the traveller, exclusive of VAT, and the actual cost to the travel agent of supplies and services provided by other taxable persons where these transactions are for the direct benefit of the traveller.

Tax charged to the travel agent by other taxable persons on the transactions described which are for the direct benefit of the traveller, shall not be eligible for deduction or refund in any Member State.

Having re worded the questions referred, the AG firstly reviewed the position regarding current case law regarding TOMS, noting the following elements as relevant in the immediate case:

• The scheme applies not only to the activities of traders that are travel agents or tour operators in the commonly accepted meaning of those terms, but also to the activities of any trader that organises travel or tour packages in its own name and uses the services of other taxable persons for that purpose.
• The scheme applies irrespective of the purpose and duration of the trip.
• The situation may be different only if the tourist services purchased from other taxable persons are purely ancillary to the main services of the trader in question – they do not constitute for customers an aim in themselves, but a means of better enjoying the principal service, and the price of those tourist services is marginal in relation to the price of the entire service.
• It is essential that that identical or similar services are taxed in the same manner, as otherwise competition could be distorted, and the uniform application of VAT rules jeopardised.
• Where a taxable person provides, as part of a single package, tourist services it purchases from other taxable persons as well as its own services, TOMS only applies to the services purchased from other taxable persons.
• The margin under TOMS must be calculated, in accordance with Article 73 of the VAT Directive, separately for each single service within the meaning of Article 308 rather than globally during a tax period (which corresponds to Article 11(A)(1)(a) and Article 26(2) of Directive 77/388).

Considering the above, the AG opined that TOMS should be applied to transportation services provided by PG to its customers for consideration, as those services undeniably have the character of short tourist excursions, and PG purchases those services from other taxable persons, but provides them to its customers in its own name. As the fees charged by PG to participants do not fully cover the cost of the transportation services purchased, the margin calculated in accordance with Article 26(2) of Directive 77/388 is negative, and thus the tax due is zero.

Conversely, the supply of goods that takes place during those excursions is a separate transaction that is not a tourist service and is provided by PG; it is therefore not subject to TOMS, and the revenue from that supply does not count towards the margin. The supply is taxed under the general rules.

The AG considered that it would be difficult to consider the transportation services provided by PG as ancillary to the supply of goods and therefore, TOMS should ‘in principle’ be considered applicable to transportation services provided in circumstances such as those in the immediate proceedings.

However, the AG acknowledge that such a conclusion raises serious systemic questions; the cost of a taxable person’s purchase of transportation services, which it subsequently provides to its customers, is covered only in part by the fees paid by those customers. Nevertheless, the remainder is covered by the revenue from the sale of goods conducted as part of the tourist services provided. Thus, that cost is clearly a component of the price of the supply of goods. However, owing to the application of TOMS, that component, from a VAT perspective, cannot be properly counted towards those costs, which stands in contradiction to the fundamental principles of the functioning of the common system of VAT, including the principles of tax neutrality and the right to deduct input tax.

The AG also opined that the inconsistent tax treatment creates competitive disadvantages for companies like PG which charges fees for excursions, compared to those that do not or that provide transportation in-house. These disparities can influence business decisions and distort competition, undermining the principle of neutrality.

Having critically examined TOMS, the AG opined that its original intent was to simplify VAT administration for complex, cross-border tourist services, but in the immediate case, excursions are local and involve limited services, such administrative concerns are minimal. Consequently, the negative effects of TOMS, such as unfavourable tax treatment and competitive distortion, outweigh any benefits.

The AG considered that Article 26 of Directive 77/388 could be interpreted to avoid penalising the supply of goods in the context of tourist excursions. In this regard, the easiest solution would be to allow deduction of input VAT on transportation costs not covered by participant fees, but the directive’s explicit wording prevents this.

To address this challenge, the AG suggested that an interpretation is possible according to which the operations of travel agents within the meaning of that provision do not include operations which consist in organising excursions combined with the supply of goods in a situation where the fees charged to excursion participants do not cover the entire cost of purchasing transportation services from other taxable persons, and those costs constitute, in the remaining part, a component of the price of those goods.

Such an interpretation entails taxing all of the taxable person’s activities under the general rules. This will not actually change the tax burden on tourist services, which will be taxed, but the taxable person will have the right to deduct the input tax paid, that is to say, the tax paid when purchasing those services from subcontractors. The result will be similar to the application of TOMS, assuming a negative margin. On the other hand, the taxable person will regain the right to deduct the remaining part of that tax from the tax due on the supply of goods, thus restoring the tax neutrality of that element of its business and preventing any distortion.

In summary, the AG opined that Article 26 of Directive 77/388 must be interpreted as not applying to a situation in which a taxable person purchases tourist services, in particular transportation services, from other taxable persons and subsequently provides them in its own name within the framework of excursions combined with the supply of goods, the purchase of which is not a condition for participation in the excursion, with the taxable person charging participants a fee that does not cover the entire cost of the services purchased from other taxable persons, and the remainder of that cost being covered by revenue from the supply of goods, thus becoming a component of the price of those goods.

The AG recalled that the referring court's third question asks whether Article 12(1) of Directive 77/388 allows for a VAT refund when a travel agent has a negative margin.

The AG noted that if the Court agrees with the opinion regarding the first two questions, this question may become irrelevant. However, in case it becomes relevant, the AG noted that whilst the assumption that applying a tax rate to a negative margin results in negative taxation is mathematically correct, the VAT system does not recognise ‘negative taxation’.

VAT is based on positive taxable amounts from transactions made for consideration. However, pursuant to TOMS, the taxable amount is the margin, which can be negative, leading to a taxable amount of zero and no VAT due. The AG recalled that Directive 77/388 does not provide for VAT refunds in such cases, and the only potential for refunds is under Article 18(4), which does not apply here due to exclusions in Article 26(4). Therefore, the answer to the third question is that Article 12(1) does not grant a right to a VAT refund for a travel agent's negative margin.

Comments: Whist we await to see whether the Court follows the AG’s opinion, in particular the suggestion regarding the application of TOMS in these specific circumstances (excursions tied with the supply of goods), businesses should be aware that the applicability of TOMS can extend beyond traditional travel agents to any business organising ‘travel services’ in their own name.

For further information please contact Mitchell Moss.

Wednesday 3 December

Opinion – T-643/24 Credidam

Topics – Copyright and related rights – communication to the public of protected works – supply of services

A Romanian referral which asks whether VAT is or is not due in a situation of tortious civil liability concerning copyright and related rights. On a proper construction of Article 2(1)(c), Article 24(1), and Article 25(a) of the VAT Directive, do holders of related rights carry out a supply of services for consideration where the user carries out a communication to the public of protected works in the absence of a licence to that effect?

Judgment – T-646/24 MS KLJUČAROVCI

Topics – Triangulation – four party supply chain

A Slovenian referral concerning triangulation and asking whether Article 141(c) of the VAT Directive, on which, in accordance with Articles 42 and 197 thereof, the non-application of the first paragraph of Article 41 depends, must be interpreted as meaning that the condition laid down in that provision is satisfied when the goods in question are supplied (that is, made available in terms of possession or ownership) under a single transport operation to the customer of the person acquiring the goods (and not to the third person in the transaction chain), which is registered for VAT purposes in the same Member State as the third person in the transaction chain? This case concerns the calculation of VAT in the context of a supply chain involving four parties registered in three different EU member states. The goods are transported directly to the fourth party in the chain, who has ownership rights over the goods, usually stored in a warehouse or mixed-use facility.

Thursday 11 December

Judgment – C-796/23 Česká síť

Topics – Societies – liability of designated partner

A Czech referral which asks whether a situation in which, pursuant to special national VAT arrangements for ‘societies’ (associations of persons that do not have legal personality), a ‘designated partner’ is liable for the payment of the VAT for the entire society, despite the fact that another partner had dealt with the end customer in relation to the supply of services, is compatible with the VAT Directive. Does the compatibility of the situation with the VAT Directive depend on whether the other partner had overstepped the rules of representing the society and dealt in his, her or its own name with the end customer.

Judgment – C-121/24 Vaniz

Topics – Joint and several liability to pay VAT after the principal debtor has ceased to exist as a legal person

A Bulgarian referral which asks whether Articles 44 and 205 of the VAT Directive, and the principles of transparency and proportionality of liability, permit the initiation, after the principal debtor has ceased to exist as a legal person, of a procedure intended to establish a person’s joint and several liability to pay VAT and the extent of such joint and several liability. Do they, following the removal of the debtor from the commercial register without a legal successor assuming that debtor’s rights and obligations, allow the existence of a registered claim against that debtor, for which a third party is liable a posteriori (knowledge based solely on experience or personal observation).

Thursday 17 December

Hearing – T-198/25 G Kft.

Topics – Correction and refunding of VAT improperly – closed period

A Hungarian referral which asks whether Articles 167, 168, 179, 180, 183, 250 and 252 of the VAT Directive, together with the principles of tax neutrality, effectiveness and proportionality, must be interpreted as permitting domestic legislation to the effect that, in relation to a period closed by means of an inspection, the correction and refunding of VAT improperly invoiced is only possible if there are new facts and circumstances that demonstrate that the taxable person did not previously have, nor could in good faith have had at its disposal, or of which the taxable person was not, nor could in good faith have been aware, even if there was no risk of any loss of tax revenue?

Topics – VAT treatment of service charges – management trustee company party to tripartite lease

Places for People Homes Limited

The First-tier Tribunal (FTT) has released its decision in this case concerning the VAT treatment of supplies made by various maintenance trust companies (MTCs) in respect of 25 blocks of flats.

The MTCs have obligations in respect of maintenance of the structure and common parts of the flats in question and provide maintenance services. The lessees of the flats make periodic payments to the MTCs (Maintenance Contributions) in respect of the cost of providing the maintenance services. Each MTC takes its own fee for acting as MTC out of the Maintenance Contributions and contributes the balance to a Maintenance Trust Fund, of which the MTC is trustee. The costs incurred by the MTC in maintaining the flats are withdrawn from the Fund. These include fees charged by the management company to whom tasks of management are sub-contracted by the MTCs, direct salary costs of staff employed by each MTC itself (such as porters or caretakers), and other costs (such as, for example, the fees charged by third-party garden maintenance businesses).

In the case of all the flats, the management company is Residential Management Group Limited (RMG). The MTCs and RMG are all subsidiaries of Places for People Homes Limited (the Appellant). The lessors of the flats are various other entities.

The principal question before the FTT was whether the supplies made by the MTCs are taxable (as HMRC contend) or exempt as the supply of an interest in land under Schedule 9, Group 1, VATA94.

The Appellant asserts that the MTCs have direct contractual obligations with the lessees to provide maintenance services, and that they do so as independent contractors, and not agents for the lessors. They submit that the maintenance services are inseparable from the leases of the flats, and that two suppliers (in this case a lessor and an MTC) can make a single supply, which is an exempt supply of land (or the supplies made by the MTC are ancillary to the principal supply of land made by the lessor under the lease, and take the VAT status of the principal supply – namely an exempt supply of land).

Alternatively, the Appellant argues that the costs incurred by the MTCs in employing their own staff are ‘disbursements’, and so outside the scope of VAT.

In disagreement, HMRC considers that the lessors retain ownership and control over the common parts to which the maintenance services relate. In consequence, the MTCs’ supplies of maintenance services are made to the lessors and not to the lessees. Also, even if the MTCs are making supplies directly to the lessees, the supplies cannot be fused with the exempt supply of land made by the lessors. They submit that supplies from different suppliers cannot be treated as a single composite supply for VAT purposes.

In a detailed decision, the FTT summarised that it had two principal issues to determine:

• The direction of supply issue
• The fusion of supply issue

The FTT noted that to be found as exempt supplies of land, both issues must be found in favour of the Appellant.

Direction of Supply Issue

The FTT considered that whilst the Appellant had submitted that the MTCs have direct contractual obligations with the lessees to provide maintenance services, and that they do so as independent contractors, and not agents for the lessors, it agreed with HMRC’s submissions.

The FTT considered that supplies made by the MTCs are to the lessors and not to the lessees, notwithstanding that the MTCs are parties to the leases between the lessors and the lessees.

Fusion of Supply Issue

Referring to earlier litigation in Bookit and National Exhibition Centre, the FTT considered that neither case alters the general principle that it is not possible to combine supplies by two suppliers under two contracts to result in one supply for VAT purposes.

In the immediate case, the FTT found that the supplies of land made by the lessors and the supplies of maintenance services made by the MTCs are separate.

Also, the FTT recalled that VAT exemptions are to be construed strictly. As the supplier of the maintenance services is not also the supplier of the land, the supply of maintenance services is not ancillary to a supply of land and cannot take on the character of an exempt supply of land.

Having found for HMRC in relation to both principal issues, the FTT went on to consider the question of disbursements.

In this regard it noted that to succeed, it would need to be demonstrated that in substance, the MTCs act as the agent of the lessors in employing staff. The FTT considered this not to be the case, with the evidence showing that the staff employed by the MTCs (such as caretakers and porters) are all employed by and on behalf of the MTCs. This analysis accords with the legal framework within which the MTCs operate. The only way in which an MTC can incur costs is in compliance with the requirements of the relevant Maintenance Trust, to utilise the Maintenance Fund for the purposes specified in the relevant trust deed or lease. It therefore incurs the costs of employing staff in its own name, as principal, to make its own (taxable) supplies to the lessor. These costs are therefore not disbursements.

In summary, on the principal direction and fusion issues, the FTT found against the Appellant. It also found that the costs incurred by the MTCs in employing their own staff are not disbursements for VAT purposes.

There remain outstanding points on the EU law principles of legitimate expectation and legal certainty which the FTT needs to consider; on these points the FTT stayed the appeal pending the release of the decision of the Upper Tribunal in Chelsea Cloisters Management Limited.

Comments: Pending the decision in Chelsea Cloisters Management Limited, this decision confirms that for similar business operating under similar models, maintenance services provided by maintenance trust companies (MTCs) are taxable supplies to the lessors rather than exempt supplies to the lessees. Additionally, the decision reinforces the principle that supplies from different suppliers cannot be combined for VAT purposes and that costs incurred by MTCs for their own staff cannot be treated as disbursements, meaning these costs must be accounted for as part of their taxable supplies. The ongoing consideration of EU law principles related to legitimate expectation and legal certainty may however provide opportunities for appeal or further clarification in the future.

For further information please contact Ali Anderson.

In April 2025, HMRC and HM Treasury published a consultation, Strengthening the Soft Drinks Industry Levy, seeking views on proposed changes to the Soft Drinks Industry Levy (SDIL). These proposals were:

• To reduce the minimum sugar content at which the SDIL applies to qualifying drinks from 5g to 4g. The SDIL standard rate would apply from 4g to 7.9g total sugar per 100ml, as opposed to 5g to 7.9g total sugar per 100ml currently
• To remove the exemption for milk-based drinks whilst introducing a ‘lactose allowance’ to account for the natural sugars in the milk component of these drinks
• To remove the exemption for milk substitute drinks with ‘added sugars’ beyond those sugars derived from the principal ingredient, such as oats or rice

A summary of responses has now been published in which it is stated that the Government is clear both on the success of the SDIL to date, in removing almost half the sugar from shop-bought soft drinks, and the importance of tackling the UK’s obesity crisis, which costs the NHS £11.4 billion per year and businesses £8.9 billion per year.

The consultation response summarises the feedback received and, with reference to the arguments made, confirms the Government’s final policy decisions and next steps.

Summary of decisions made:

• The Government will reduce the current lower threshold at which SDIL applies from 5g of total sugar per 100ml to 4.5g of total sugar per 100ml.
• The Government will remove the current exemption for milk-based drinks. This applies to pre-packaged milk-based drinks with added sugar, like bottled milkshakes and coffee drinks. ‘Open-cup’ milkshakes prepared in cafés, bars, etc will remain out of scope; as will plain cow’s milk, and other milk drinks without added sugar. The Government will introduce a ‘lactose allowance’ to account for the naturally occurring sugars in milk. This aims to ensure that the vast majority of lactose present in a milk-based drink will be excluded in the ‘total sugar’ value when determining a drink’s liability to SDIL. The only exceptions to this will be lactose or galactose added as an ingredient, hydrolysed lactose, or lactose present in whey powder. This is on advice from health experts that these sugars, although derived initially from milk, should be treated as free sugars. This moves away from the consultation proposal that based the allowance on the percentage of liquid milk in a product. The revised allowance will include lactose from sources other than liquid milk, such as milk powder, and focus on measuring only free sugars when calculating liability to the levy.
• The Government will remove the exemption for milk substitute drinks with added sugar. This will bring plant-based drinks with added sugar into scope of SDIL, should they contain 4.5g or more total sugars per 100ml. The Government will exclude from scope milk substitutes without added sugar. Plant-based drinks which contain only sugars released from their principal, or ‘core,’ ingredient (such as soya or oats) will be out of scope, ensuring that unsweetened plant-based drinks continue to be out of scope, just as plain animal milks are.

The Government has extended the proposed implementation date by 9 months to 1 January 2028. A technical consultation on the draft legislation will be published in 2026 and changes to legislation introduced in a subsequent Finance Bill, ahead of the legislation taking effect on 1 January 2028. The technical consultation will be to confirm whether the legislation works to deliver the policy intentions, rather than to re-open discussions on the policy itself.

In recognition that the policy changes outlined will ask soft drink producers to adapt and invest in further reformulation, and that certainty is required to support this process, the Government has committed to not make any further changes to SDIL this Parliament.

Please also refer to Soft drink levy extended to protect children and improve health.

For further information please contact Danny Vu.

This Collection pulls together guidance about what you will need to do if you are using postponed VAT accounting (PVA) to account for import VAT on your VAT Return.

Ghana

The Minister for Finance has presented to Parliament the 2026 Budget Statement and Economic Policy of the Government of Ghana.

The key tax measures proposed in the 2026 Budget are expected to come into force on 1 January 2026 unless a different commencement date is otherwise provided. Indirect tax measures include:

• Abolishing VAT on mineral reconnaissance and exploration
• Reducing the effective VAT rate from 21.9% to 20% resulting from the decoupling of GET Fund and NHIL levies from the VAT base and the abolishment of the Covid-19 Levy
• Raising the VAT registration threshold from GHS 200,000 to GHS 750,000
• Extending sunset clause for zero-rating of the supply of locally manufactured textiles from 2025 to 2028
• Not extending the sunset clause with respect to zero-rating of locally assembled vehicles under the Ghana Automative Development Programme
• The Minister indicated plans to operationalise digital VAT systems to improve VAT administration. Specifically, the Government plans to roll out Fiscal Electronic Devices (FEDs) to monitor taxable transactions by taxable persons, particularly those within the retail sector, and launch a VAT reward scheme to incentivise the public to demand VAT receipts when transacting business
• Expand excise regimes to include carbon-intensive products, plastics, and sugary beverages
• Harmonise excise rates and broaden the tax base
• Ensure that excise policies encourage healthy living, environmental protection and fiscal responsibility
• Simplify Customs border procedures
• Reduce clearance times
• Lower compliance costs for businesses