Monthly Archives: December 2025

VAT treatment of the supply of locum doctors

By   16 December 2025
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HMRC has issued Revenue and Customs brief 9 (2025)  which covers the VAT liability of the supply of temporary medical staff (locum doctors).

This change to HMRC’s previous view (that these supplies were taxable) is a consequence of the First-Tier Tribunal’s decision in Isle of Wight NHS Trust case which ruled in favour of the Trust, finding that the supply of locums is an exempt service. 

The Brief also provides guidance for businesses who wish to claim a refund of overdeclared output tax following the decision.

The ABC of VAT – property

By   15 December 2025
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A glossary

Anyone who has had even the slightest brush with VAT will know that it is a very complex tax. Now, multiply that complexity by the intricacy and occasionally arcane nature of property law and one may see that the outcome will be less than straightforward. I have produced a general guide and an article on residential property VAT Triggerpoints

I hope the following glossary will help with steering through some of the difficulties.

  • Annex– a building which is joined to or is next to a larger main building usually an extension or addition to a building
  • Assign – to transfer the right or interest in a property from one party to another
  • Break clause – a clause allowing either landlord or tenant to give written notice after a particular date or period of the tenancy in order to end the tenancy
  • Beneficial owner – party deemed to make a supply of property rather than the legal owner
  • Blocked input tax – VAT which a developer is unable to recover when constructing a new dwelling. Typically, expenditure on good such as; carpets, fitted furniture, and gas and electrical appliances
  • Building materials– goods ordinarily incorporated into a property which attracts similar VAT treatment to the construction services.
  • Capital Goods Scheme(CGS) – a method of calculating the recovery amount of input tax incurred on property over a ten-year period, Details of the CGS here
  • Certificate – a document issued to a supplier in order to obtain certain zero-rated or reduced-rated building work
  • Change of number of dwellings– usually a conversion from commercial to residential, or a single house into flats (or flats into a single house) at 5% VAT
  • Consideration– a thing done or given in exchange for something else = a supply. Usually quantified in money, but in some cases non-monetary consideration
  • Construction of new dwellings – a zero rated supply
  • Contract – legal document detailing the agreement of terms between the vendor and buyer
  • Contractor – entity responsible for building works
  • Conversion–work on a non-residential building which results in a property designed as a dwelling(s) being created
  • Covenants – rules governing the property in its title deeds or lease. May impact the definition of dwellings
  • Curtilage– either a garden, or an area surrounding a building which is deemed to be part of the property
  • Designed as a dwelling– a property initially designed for residential use, regardless of any subsequent alternative use
  • Dilapidations – items that have been damaged during a tenancy for which the tenant is responsible for the cost of repair or replacement. Usually VAT free
  • DIY Housebuilders’ Scheme – a scheme which ‘self-builders’ to recover VAT on a new build dwelling or conversion. Details here
  • Domestic Reverse Charge – a self-supply charge details here
  • Dwelling– a building deemed to be residential
  • Empty house – if, in the ten years before work on a dwelling starts, it has not been lived in, the work may be subject to 5% rather than 20% VAT
  • Exempt– a supply that is VAT free. It usually results in attributable input tax falling to be irrecoverable
  • Facade– a wall (or two walls on a corner plot) which may be retained without affecting the zero rating of a new dwelling construction
  • Grant– a supply of an interest in land
  • Holiday home – the sale or long lease of a holiday home cannot be zero-rated even if it is designed as a dwelling
  • Housing Association – a non-profit organisation which rents residential property to people on low incomes or with particular needs
  • In the course of construction– meaningful works that have occurred in relation to the construction of a building (but prior to its completion)
  • Incorporated goods – goods sold with a new dwelling which are zero rated and to which the input tax block does not apply. See white goods
  • Input tax– VAT incurred on expenditure associated with property
  • Interest in, or right over, land– the right to access to and use of, land. Usually via ownership or lease
  • Lease – legal document governing the occupation by the tenant of a premises for a specific length of time
  • Licence to occupy– a permission to use land that does not amount to a tenancy
  • Live-work units – a property that combines a dwelling and commercial or industrial working space. Usually subject to apportionment
  • Major interest–a supply of a freehold interest or a lease exceeding 21 years
  • Multiple occupancy dwelling – a dwelling which is designed for occupation by persons not forming a single household
  • New building–a commercial building less than three years old the sale of which is mandatorily standard
  • Non-residential– a commercial building which is not used as a dwelling
  • Open market value – likely sale price with a willing seller and buyer, with a reasonable period of marketing and no special factors affecting the property
  • Option to tax (OTT) – act of changing the exempt sale or letting of a commercial into a taxable supply. The purpose is to either; recover input tax or avoid input tax being charged. Details here
  • OTT disapplication– the legal removal of a vendor’s option to tax
  • OTT not applicable – the OTT does not apply to residential buildings (so VAT can never apply to dwellings)
  • OTT revocation– the ability to revoke an option to tax after six months or twenty years
  • Partial exemption– a calculation to attribute input tax to exempt and taxable. Generally, VAT incurred in respect of exempt supplies is irrecoverable
  • Person constructing – a developer, contractor or sub-contractor who constructs a building
  • Premium – upfront payment for a supply of property
  • Relevant Charitable Purpose (RCP)–the use by a charity for non-business purposes or for use as a village hall or similar
  • Relevant Residential Purpose (RRP)– dwelling used for certain defined residential purposes, eg; children’s home, a hospice or student accommodation
  • Reverse surrender– a tenant surrenders an onerous lease to the landlord and makes a payment to surrender
  • Share of freehold – where the freehold of the property is owned by a company and the shareholders are the owners of the property
  • Single household dwelling– a building designed for occupation by a single household
  • Snagging – the correction of building faults. Usually follows the VAT liability of the original work
  • Stamp Duty Land Tax (SDLT) – tax paid by a purchaser of a property. SDLT is increased if the sale of a commercial property is the subject of an option to tax
  • Substantial reconstruction– certain significant works to a listed building
  • Surrender– a tenant surrenders the lease to the landlord in return for payment
  • Taxable supply– a supply subject to VAT at the standard, reduced or zero-rate
  • Use as a dwelling – a building which was designed or adapted for use as someone’s home and is so used
  • Vendor – entity selling a property
  • Transfer of a Going Concern (TOGC) – the VAT free sale of the assets of a business as a going concern. This may include a tenanted property
  • Zero-rated– a taxable supply subject to VAT at a rate of 0%

We strongly recommend that advice is obtained if any property transaction is being undertaken.

Details of our land and property services may be found here.

Excise Duty: Your Christmas drink of choice, or perhaps not

By   9 December 2025
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Christmas cheer
Advocate General (AG) Manuel Sanchez-Bordona has released his opinion in the Bene Factum case (The link is to Lithuanian, so you ‘may” need to translate…).

A curious matter and one which brings into focus the drinking habits of people across the EU. Now, as those who know me will be aware, I am not adverse to a good single malt, nor a decent claret, but I do wonder sometimes where people draw the line.

Background

It transpires that in Lithuania people who choose not to drink, or cannot afford, even the cheapest alcoholic items have turned to drinking perfume and mouthwash which contain isopropyl alcohol. This has a similar effect on the human body to what most people would regard as being from more usual beer, wine or spirits etc. Sounds delicious eh?

Issue

The issue was whether these products where subject to Excise Duty, or, as the appellant contended, they were duty free as cosmetic products.

Decision

The AG found that isopropyl alcohol is almost unpalatable to most people. The fact that Bene Factum held out, advertised and marketed to people to drink the products did not affect the fact that the main purpose of the goods was for their use as cosmetics and mouthwash. What must be considered is Excise Duty depends on an objective classification to determine whether it is intended for human consumption. This classification is not affected by the fact that Bene Factum actively encouraged people to drink these products rather than use them for cosmetic purposes.

Consequently, the goods where not subject to Excise Duty. Good news for Lithuanian alcohol connoisseurs! It remains to see if the court follows this opinion, in most cases they do, but one never knows.

Commentary 

If there is anybody out there who is getting ready for their Christmas party, looks at some cosmetic products and considers taking a swig, I make the following comments:

  • Probably best to stick supermarket own brand booze if money is an issue
  • I expect that these things taste absolutely terrible (although I have not sampled them)
  • I tend to stick to things that are to be applied externally doing just that with them without ingestion
  • If you can’t decide whether to gargle with something or drink it, I counsel spitting it out
  • If these goods come to the UK, at least they will be even cheaper being duty free. I am not sure that is a good thing.

VAT Grouping: Protection of the Revenue

By   9 December 2025
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The salient amendments are to the references to ‘protection of the revenue’ and ‘Revenue loss’.
VAT grouping is a facilitation measure by which two or more entities can be treated as a single taxable person (a single VAT registration) for VAT purposes. The measure was once restricted to “Bodies Corporate” which includes; companies of all types and limited liability partnerships. However, from 1 November 2019, grouping is additionally available for all entities, including; partnerships, sole traders and Trusts in certain cases.
HMRC has the vires to refuse an application for a VAT group, or remove a member if HMRC consider that it may lead to a VAT loss.

The Change

“The definition of ‘protection of the revenue’

Where this is considered necessary for the protection of the revenue, the VAT grouping legislation gives HMRC the power to:

  • prevent a person joining a VAT group
  • remove an existing member from a VAT group

We usually will not use our protection of the revenue powers if the revenue loss follows from the normal operation of grouping. If we feel that the revenue loss does not follow the normal operation of grouping, then we would consider using our protection of the revenue powers, such as:

  • where we identify enhanced risks to the collection of revenue
  • the use of VAT avoidance and distortion in the liability of the group’s supplies

In this context, ‘revenue loss’ means the VAT that is not charged when one company in a group sells to another company in the same group. This usually happens when one or more companies in the VAT group cannot reclaim all the VAT they pay because they make supplies that are exempt from VAT.

We will use our revenue protection powers if it looks like the main reason for VAT grouping someone is to ignore supplies from that company’s overseas branches to other members of the VAT group.

This applies whether that person is established in the UK or has a UK fixed establishment”.

VAT: Top 10 Tips for small businesses and start-ups

By   8 December 2025
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VAT Basics
At some point it is likely that a small business or start-up will need to consider VAT. Here are a few pointers:
  1. Should you be registered for VAT?

If your income is above £90,000 pa of taxable supplies, you have no choice. But you can voluntarily register if below this threshold. There are significant penalties for failure to register at the correct time.

  • Advantages of VAT registration: VAT recovery on expenses plus, perhaps; gravitas for a business
  • Disadvantages: administration costs plus a potential additional cost to customers if they are unable to recover VAT charged to them (eg; they are private individuals) which could affect your competitiveness

More here

  1. Even non-registered businesses can save VAT
  • Look to use non-VAT registered suppliers, or non-UK suppliers (however, this may count towards your registration turnover)
  • If you are purchasing or leasing commercial property, consider looking for non-opted property or raise the issue of your inability to recover VAT in negotiations on the rent
  • Take advantage of all zero and reduced rates of VAT reliefs available
  • Challenge suppliers if you consider that a higher rate of VAT has been charged than necessary
  1. Consider using the appropriate simplification scheme 
  • Flat Rate Scheme (1% discount in first year of registration)
  • Cash Accounting (helps avoid VAT issues on bad debts)
  • Annual Accounting (can generate real, cash flow and/or administrative savings)
  • Margin schemes for second-hand goods

Further details here and here

  1. Make sure you recover all pre-registration and/or pre-incorporation VAT

VAT incurred on goods on hand (purchased four years ago or less) and services up to six months before VAT registration is normally recoverable.

  1. Are your VAT liabilities correct?

Many businesses have complex VAT liabilities (eg; financial services, charities, food outlets, insurance brokers, cross border suppliers of goods or services, health, welfare and education service providers, and any business involved in land and property). A review of the VAT treatment may avoid assessments and penalties and may also identify VAT overcharges made which could give rise to reclaims. Additionally, these types of business are often restricted on what input tax they can reclaim. Check business/non-business apportionment and partial exemption restrictions.

More on charities here

  1. Have you incurred VAT elsewhere outside the UK?

You may be able to claim this from overseas tax authorities. Details here

  1. Do you recover VAT on road fuel or other motoring costs?

Options for VAT on fuel: keep detailed records of business use or use road fuel scale charges (based on CO2 emissions)

If you need a car; consider leasing rather than buying. 50% of VAT on lease charge is potentially recoverable, plus 100% of maintenance if split out on invoice.  VAT on the purchase of a car is usually wholly irrecoverable.

More here

  1. Remember: VAT on business entertainment is usually not recoverable but VAT on subsistence and staff entertainment is. 
  1. Pay proper attention to VAT
  • keep up to date records
  • submit VAT returns and pay VAT due on time (will avoid interest, potential penalties and hassle from the VAT man)
  • claim Bad Debt Relief (BDR) on any bad debts over six months old
  • contact HMRC as soon as possible if there are VAT payment problems or if there are difficulties submitting returns on time
  • ensure that the business is paying the right amount of tax at the right time – too little (or too late) may give rise to penalties and interest – too much is just throwing money away
  • check the VAT treatment of ALL property transactions

More here

  1. Challenge any unhelpful rulings or assessments made by HMRC

HMRC is not always right.  There is usually more than one interpretation of a position and professional help more often than not can result in a ruling being changed, or the removal or mitigation of an assessment and/or penalty.

We can assist with any aspect of VAT. You don’t need to be a tax expert; you just need to know one… We look after your VAT so you can look after your business.

VAT: New guidance on using postponed VAT accounting

By   2 December 2025
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HMRC has published (on 28 November 2025) a collection of new guidance on postponed VAT accounting (PVA).

The guidance covers what a business needs to do if it is using PVA to account for import VAT on its VAT returns.

The publication brings together all PVA guidance, giving detailed information about: