Category Archives: Law

VAT treatment of cryptoassets – new HMRC guidance

By   19 October 2026
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Following our previous articles on cryptoassets, HMRC has published a document: Help with VAT treatment of cryptoassets — GfC2. 
This guidance sets out:
  • what HMRC means by cryptoassets
  • when a business needs to register
  • what information a business need to collect about your customers – and why
  • the rules about the place of supply for cryptoasset transactions
  • what records digital platforms and marketplaces need to keep
It is aimed at UK and overseas businesses involved in cryptoasset transactions where UK VAT may apply. It includes businesses that sell or exchange cryptoassets and businesses that operate platforms where other people do so.

Overview
Cryptoassets (sometimes called ‘tokens’ or ‘cryptocurrencies’) are a digital representation of value that are created, stored and transferred securely using public computer networks, and cannot be altered or destroyed.
There are many different types of tokens, and they can have different uses. Some tokens can represent ownership of something or the right to access particular goods or services. The asset, goods or services represented by the token are known as the underlying asset or supply. The underlying asset can be tangible or intangible, such as digital or physical art, music and collectables.
A non-fungible token (NFT) is a unique digital certificate that represents ownership of an asset. The VAT treatment of an NFT will depend on the asset it represents. For example, if the underlying asset is a piece of digital art, then the same VAT treatment as digital art will usually apply. If the underlying asset is a physical item, such as a car, then the same VATtreatment as a car will usually apply.
It is worth emphasising that there are no separate VAT rules for cryptoassets. VAT still depends on what you supply and how it is used, not the definition or description of a token
HMRC says that following these guidelines will help taxpayers reduce the risk of mistakes, VAT adjustments and penalties.

VAT: Collagen beauty drinks. The Minerva Research Labs Limited case

By   21 September 2026
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Latest from the courts
In the Minerva Research Labs Limited v HMRC [2026] UKFTT 1320 (TC) First-Tier Tribunal (FTT) case the issue was whether collagen beauty drinks are standard-rated, or zero-rated as food of a kind used for human consumption. In order to determine the correct VAT treatment, the Tribunal was required to apply a judicial ‘multifactorial test’. This meant assessing the product’s ingredients, appearance, marketing, and function to decide how an ordinary person would view the product.
Background
The appellant produces a range of collagen-based liquid supplements which are targeted at the health of skin, hair, and joints and muscles. The products are packaged in cartons containing small, single-use, mono-dose bottles. 
Minerva initially accounted for output tax on the sale of the product. However, it subsequently submitted an error-correction claim which sought a refund of circa £3.64 million on the basis that the drinks should be zero-rated food. HMRC rejected the claim, prompting Minerva’s appeal.
NB: For VAT purposes, ‘food’ includes drink.
Decision
 
The FTT acknowledged that the products provide nutritional value; supplying a notable percentage of daily protein requirements alongside energy, vitamins, and minerals, but that nutritional density does not automatically equal food. It determined that:
  • the products were held out for sale as liquid beauty products
  • they were purchased for cosmetic and anti-ageing reasons
  • they were not marketed to be eaten instead of a meal, or as a snack
  • the words ‘dose’ and ‘treatment’ appeared marketing and packaging
  • the products were labelled with precautions or warnings (that food would not)
 Consequently, the products were not food and standard rating applied. 
The appeal was therefore dismissed. 
 
Legislation
VAT Act 1994, Schedule 8, Group 1, item 1. Food of a kind used for human consumption. 
Commentary
Another case on what is food. New products seem appear on a daily basis and the products themselves and marketing of the develop at a rapid pace as a result of changes to consumer tastes and health trends. Trying to fit modern foods into 1970s definitions (when VAT was introduced) will always cause absurd, contradictory results.

This case follows on from well-know cases such as: Jaffa Cakes, Mega Marshmallows, Walkers Sensations Poppadoms, Duelfuel Nutrition, and Greggs, sausage rolls as well as flapjacks, brownies and cereal bars. If there is any doubt about whether a ‘food’ product is covered by the zero-rating, we advise that expert advice is sought (we are happy to provide it!)

VAT: New guidance for fund management services

By   15 September 2026
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HMRC has published new guidance GfC20 on the sometimes complex subject of outsourced fund management services.

These Guidelines for Compliance (GfC) set out HMRC’s recommended approach and are designed to help businesses determine the correct VAT treatment of outsourced fund management services, including whether services should be treated as single or multiple supplies.

More on exemption for fund management services here

More on pension management here. 

VAT: Electronic sales suppression (ESS) compliance checks

By   8 September 2026
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HMRC has published a new Factsheet CC/FS68A which provides information on electronic sales suppression (ESS). It explains the powers HMRC can use to help it identify and tackle ESS. It also explains the penalties which may be levied if a person is in possession of an ESS tool.
More details on ESS and ESS tools here. 

HMRC powers

Finance Act 2022, Schedule 14 allows HMRC to issue an information notice for ESS. This means HMRC can ask for certain information that applies to ESS. It allows the issue of a Notice to a ‘relevant person’ for a ‘relevant purpose’.

Relevant Person

A ‘relevant person’ is any person who HMRC think may be liable to a penalty for being involved in ESS.

Relevant purpose

A ‘relevant purpose’ is the reason HMRC is asking for information about ESS and ESS tools.

The law allows HMRC to do this in three situations. These are to help HMRC:

  • decide whether a relevant person has made, supplied, promoted, or possesses an ESS tool and whether this person is liable to a penalty
  • understand how the ESS tool works
  • identify any other person who has made, supplied, promoted, or possesses the ESS tool. 

VAT: What is a taxable supply? – Definition

By   8 September 2026
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VAT Basics

Taxable supply

It is sometimes useful when considering a transaction to “go back to basics” for VAT purposes. There are certain tests to determine whether a supply is taxable, and these are set out below. Broadly, the tests establish whether UK VAT is payable on a sale and they determine whether an entity is “in business”, that is; carrying on an economic activity.

A transaction is within the scope of UK VAT if all four of the following conditions are satisfied:

  • It is a supply of goods or services.

There is a distinction between the two types of supply as different VAT treatments may apply.  Generally, everything that is not tangible goods is services. However, if no goods or services are actually provided, there is no supply.  Indeed, if there is no consideration for a supply, in most cases it is not a taxable supply.

  • It takes place in the UK.

There are quite complex tests to consider when analysing the “place of supply”, especially where services are concerned.  If the place of supply is outside the UK then usually no UK VAT is due, however, the supply may be subject to VAT in another country.

  • It is made by a taxable person.

A taxable person is any legal entity which is, or should be, registered for VAT in the UK.

  • It is made in the course or furtherance of any business carried on by that person

Business

The term “business” is only used in UK legislation, The Principal VAT Directive refers to “economic activity” rather than “business” and since UK domestic legislation must (well historically) conform to the Directive both terms must be seen as having the same meaning.  Since the very first days of VAT there have been disagreements over what constitutes a “business”. I have only recently ended a dispute over this definition for a (as it turns out) very happy client. The tests were set out as long ago as 1981 and may be summarised as follows:

  • Is the activity a serious undertaking earnestly pursued?
  • Is the activity an occupation or function, which is actively pursued with reasonable or recognisable continuity?
  • Does the activity have a certain measure of substance in terms of the quarterly or annual value of taxable supplies made (bearing in mind that exempt supplies can also be business)?
  • Is the activity conducted in a regular manner and on sound and recognised business principles?
  • Is the activity predominantly concerned with the making of taxable supplies for a consideration?
  • Are the taxable supplies that are being made of a kind which, subject to differences of detail, are commonly made by those who seek to profit from them?

So, if these tests are passed a taxable supply exists. The next step is to establish which VAT rate applies. In an often quoted comment from the judge in the Morrison’s Academy Boarding Houses Association 1978 STC1 Court Of Session case “…In my opinion it will never be possible or desirable to define exhaustively ‘business’ ”. Which what it lacks in helpfulness, makes up for in candour.

There was something of a deviation from the Lord Fisher tests in the Longbridge Court of Appeal case, however, that appears to be a blip and HMRC seem to have reverted to Lord Fisher in subsequent hearings on the same topic. A bit of a: watch this space area of VAT.

Recent cases on business

Recent case law on this issue here and here and HMRC Internal guidance on the Lord Fisher tests here

Commentary

Tip: It is often easier to consider what isn’t a taxable supply to establish the correct VAT treatment.  Specific examples of situations which are not taxable supplies are; donations, certain free supplies of services, certain grants or funding, some compensation and some transactions which are specifically excluded from the tax by legislation, eg; transfers of going concerns (TOGC).

I think that it is often the case that the basic building blocks of the tax are overlooked, especially in complex situations and I find it helps to “go back to the first page” sometimes.

A VAT Did you know?

By   27 August 2026
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Orange juice is zero rated. Lemon juice is zero rated. Mix them, and the product is standard rated.

A VAT Did you know?

By   31 July 2026
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Scottish snowballs VAT free, but if you buy Swedish snowballs, they are standard rated.

VAT: Changes to the Capital Goods Scheme

By   13 July 2026
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HMRC has produced a policy paper on the simplification of the Capital Goods Scheme (CGS).
The CGS is a mechanism for adjusting an input tax claim which requires a business to spread the initial input tax claimed over a number of years. If a business’ taxable use of the asset increases, it is permitted to reclaim more of the original VAT and if the proportion of the taxable supplies decreases it will be required to repay some of the input tax initially claimed. The use of the CGS is mandatory.

HMRC says its measure details the simplification of the CGS to reduce the administrative burden for VAT registered businesses.

From 29 July 2026:

  • computers and items of computer equipment will be removed from the list of assets covered by the scheme
  • the expenditure threshold for land, buildings and civil engineering work will increase from £250,000 (exclusive of VAT) to £600,000 (exclusive of VAT).
Existing assets and expenditure incurred before that date will continue to be treated under the current rules.
The Value Added Tax (Amendment) Regulations 2026 has been made to implement these changes.
The lifting of the CGS threshold for land and buildings is long overdue, but nevertheless welcome.

Reduced VAT rate for children’s meals, tickets, and family attractions

By   26 May 2026
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HMRC has announced a temporary reduced VAT rate of 5% will apply to the supply of children’s meals, tickets, and family attractions from 25 June 2026 to 1 September 2026 – Revenue and Customs Brief 5 (2026).

The brief explains a temporary reduced rate of VAT of 5% that will apply to:

  • certain supplies of children’s meals
  • children’s admission to theatres, cinemas, concerts, exhibitions and shows
  • all admission tickets to attractions suitable for families with children

Children’s meals

The reduced rate applies to the supply of children’s meals where both of the following conditions are met:

  • the meal is held out for sale only as a meal for children
  • the meal is supplied as part of catering services by a restaurant, café or similar establishment for consumption on the premises

Children’s theatre and cinema tickets

The reduced rate applies to children’s admission tickets to:

  • cinema screenings
  • theatrical performances, shows and concerts
  • exhibitions

A children’s ticket is one that is held out for sale only as a right of admission for a child, based on how it is marketed, priced and presented by the supplier.

Attractions

The reduced rate applies to charges made for a right of admission for any customers, regardless of age, to qualifying attractions that are suitable for families with children.

This includes admission to the following venues, unless that admission is already exempt from VAT (for example because it is supplied by a qualifying charity or other eligible body):

  • amusement parks and fairs, including water parks and theme parks (excluding pay-per-ride attractions)
  • circuses
  • adventure parks, including outdoor adventure centres
  • museums and similar cultural facilities, including planetariums, heritage sites, nature reserves and botanical gardens
  • zoos, aquariums, wildlife parks and farm visitor attractions
  • soft play centres, indoor bounce parks and indoor play facilities
  • observation attractions, including viewing platforms, towers and observation wheels

Only supplies of admission to these types of attractions fall within the scope of the relief.

This Brief will be relevant to businesses making consumer‑facing supplies to families with children during the school summer holidays. This includes, but is not limited to, the following types of organisations and their advisers:

  • restaurants, cafés and similar catering establishments
  • cinemas, theatres, exhibition and performance venues
  • operators of circuses, fairs, amusement parks, theme parks, adventure parks and water parks, zoos and other animal attractions, soft play centres, observation attractions and certain other family-focused attractions
  • museums and similar cultural attractions

 

VAT: Bad Debt Relief – A guide

By   19 May 2026
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VAT Basics

Bad Debt Relief (BDR)

We understand that businesses and consumers are likely to fall into default in increasing numbers if the economy continues to worsen and it is anticipated that the ability to settle of debts on time will significantly decrease. It is apparent that many debts will never be settled. Consequently, it appears timely to look at the available VAT relief.

The VAT position

VAT registered businesses usually account for tax on an accruals basis (but see CAS) and will therefore be required to account for output tax in the same VAT period as an invoice is issued to a customer. If that invoice is not paid and a bad debt arises this would mean that tax has been accounted for on a payment which has not been received.

Relief

Anything which can relieve the burden of VAT is to be welcomed, especially in such trying times. So VAT Bad Debt Relief (BDR) is a useful tool if a business is aware of it and understand when it may be claimed.

It is at the very least frustrating when a client does not pay, and in some cases this situation can lead to the end of a business. At least the VAT charged to the client should not become a cost to a supplier. The BDR mechanism goes some way to protect a business from payment defaulters.

There is a relief however, as normal with tax, there are specific conditions:

Conditions for claiming BDR

The supplier must have supplied goods or services for a consideration in money and must have accounted for and paid VAT on the supply. All or part of the consideration must have been written off as a bad debt by making the appropriate entry in the business’ records (this does not have to be a “formal” procedure and need not be notified to the customer). At least six months (but not more than four years and six months) must have elapsed since the later of the date of supply or the due date for payment.

Records required

Various records and evidence must be kept (for four years from the date of claim), in particular to identify:

  • the time and nature of the supply, the purchaser, and the consideration
  • the amount of VAT chargeable on the supply
  • the accounting period when this VAT was accounted for and paid to HMRC
  • any payment received for the supply
  • entries in the refund for bad debts account
  • the accounting period in which the claim is made

Procedure for claiming BDR

This part is straightforward: The claim is made by including the amount of the refund in Box 4 of the VAT Return for the period in which the debt becomes over six months old. The amount of BDR is either set-off against output tax due, or may create a refund position with HMRC.

Repayment of refund

Repayment of VAT refunded is required where payment is subsequently received or where the above conditions have not been complied with.

Adjustment of input tax for the debtor

Businesses are required to monitor the time they take to pay their suppliers and repay input tax claimed if they have not paid the supplier within six months. Subsequent payment of all or part of the debt will allow a corresponding reclaim of input tax. This is an easy assessment for HMRC to make at inspections, so businesses should make reviewing this matter this a regular exercise.

Finally, there is tax point planning available to defer a tax point until payment is received for providers of continuous supplies of services. Please see here

More on general VAT payment problems here.