HMRC Publications
HMRC has updated its Notice 706 on partial exemption. This guidance explains partial exemption and the methods and calculations a business may use to calculate the amount of input tax it can recover.
More detailed guidance has been added to Paragraph 10.2 on a company’s sale of existing shares.
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.
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.
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.
More here
VAT incurred on goods on hand (purchased four years ago or less) and services up to six months before VAT registration is normally recoverable.
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
You may be able to claim this from overseas tax authorities. Details here
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
More here
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.
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:
Private hire vehicles
Suppliers of private hire vehicle and taxi services will be excluded from the scope of the Tour Operators’ Margin Scheme (TOMS) from 2 January 2026, except where these are supplied in conjunction with certain other travel services. The government also published a response to the Consultation on the VAT Treatment of Private Hire Vehicles and HMRC published Revenue and Customs Brief 8 (2025): VAT Tour Operators’ Margin Scheme — supplies by private hire vehicle or taxi operators, which explains how to account for VAT as a private hire vehicle operator, a taxi operator, or business re-selling such supplies.
E-invoicing
VAT treatment of business donations of goods to charity
There will be a new VAT relief to be be introduced on 1 April 2026 for business donations of goods to charity for distribution to those in need or use in the delivery of their charitable services, ie; in addition to goods donated for sale. HMRC also published a response to the Consultation on the VAT treatment of business donations of goods to charity, and a policy paper, VAT relief for business donations on goods to charities. The relief will apply to goods valued up to £100 per item, with a higher £200 threshold for essential electrical items to help tackle digital poverty. Eligibility is strictly limited to registered charities, meaning community interest companies (CICs) and social enterprises are excluded unless they register as charities. This corrects an anomaly where there is no VAT liability when businesses dispose of goods to landfill, but may incur one when donating those same goods to charity.
Motability
From 1 July 2026, vehicles leased through the Motability Scheme will be subject to 20% VAT on top-up payments for more expensive vehicles which are made in addition to the transfer of eligible welfare payments for more expensive vehicles on the scheme. The standard rate of Insurance Premium Tax will apply to scheme insurance contracts: VAT and Insurance Premium Tax: change to reliefs for qualifying motor vehicle leasing schemes – GOV.UK There will be no changes to vehicles designed for, or substantially and permanently adapted for, wheelchair or stretcher users.
ATCS
The Government has confirmed that the ‘Advance Tax Certainty Service’ (ATCS) will launch in July 2026 and provide clearances on corporation tax, stamp taxes, VAT, PAYE and the construction industry scheme, where there is no existing statutory route to certainty.
Q: I have received a demand notice for payment of VAT. Why?
A: HMRC have not received payment of the VAT liability that is described in the demand notice. You should therefore pay the outstanding debt without delay so as to avoid further recovery action. HMRC take prompt action to recover debts.
Q: I am not able to pay the debt immediately because of a temporary cash-flow problem. What should I do?
A: You should make urgent contact with your bank or your financial adviser to explore means of overcoming these temporary financial difficulties.
Q: I have consulted the bank/financial adviser, but they are unable to help. What else can I do?
A: Without further delay contact the Regional Debt Management Unit whose address appears on the demand notice. They may be able to help you by agreeing a brief period in which to pay the debt. They are usually helpful and will consider carefully all practical options for settlement. However, if these do not produce a solution or they do not receive a response to their request for payment, they may, like other creditors, take action to recover the money they are owed.
Q: What is a Late Payment Penalty?
A: These are a civil penalty to encourage businesses to submit their VAT returns and pay the tax due on time.
Q: When will a penalty be issued?
A: A business is in default if it sends in its VAT return and or the VAT due late – full details here.
Q: How much is it?
A: First Penalty
A business will not incur a penalty if the outstanding tax is paid within the first 15 days after the due date. If VAT remains unpaid after Day 15, the business incurs the first penalty. This penalty is set at 2% of the tax outstanding after Day 15. If any of this tax is still unpaid after Day 30, the penalty increases to 4% of the tax outstanding after Day 30.
Second Penalty
If tax remains unpaid on Day 31, a business will begin to incur an additional penalty on the VAT that remains outstanding. It accrues on a daily basis, at a rate of 4% per annum on the outstanding amount. This additional penalty will stop accruing when the taxpayer pays the tax that is due.
Q: What sort of assessments are sent out?
A: An assessment may be issued if a VAT return is not submitted by the due date. The amount may be based on previous returns. If a business does not submit its returns time after time, the assessment value will increase. An officer may also issue an assessment after a visit, if they have found errors in the amount of tax declared on previous returns. Both types are included in the taxpayers’ debt and are collected in the normal way if they are not paid promptly.
Help
There are a number of schemes available which may help cashflow or possibly reduce the amount of VAT you pay.
Cash Accounting – where you only pay VAT to HMRC when you have received payment from your customer.
Annual Accounting – where you make set monthly payments and make one return a year with an adjusting payment.
Flat Rate Scheme – where you pay a set percentage of your turnover rather than calculating output tax less input tax.
Bad Debt Relief – where you are able to reclaim VAT relief on your bad debts.
Further information
Further information on how to deal with a VAT debt here.
Please contact us if VAT payments are proving a problem for your business. Negotiation with HMRC is possible.
Kangaroo steak is sold as food in shops – food is zero-rated, but the sale of live kangaroos is standard rated.
Repayment interest and commercial restitution for VAT Autumn Budget 2025 representation by the Chartered Institute of Taxation.
This joint representation by the CIOT and the ATT covers the blatant unfairness of the amount of interest HMRC charges taxpayers when a business pays VAT late and the amount that HMRC pays a taxpayer when there are delays in making repayments to a business when they are due. Unsurprisingly, taxpayers have to pay a higher rate of interest; for reasons unknown!
Details here.
HMRC has recently updated its internal guidance: VIT33000 – How to treat input tax: late claims for input tax.
Input tax claims should be made in the accounting period in which the tax on the relevant goods or services became chargeable (the time of supply, or ‘tax point’). This is referred to as the ‘proper period’.
There are times when a claim cannot be made in the proper period. For example, the supporting evidence may not have been received. However, there are other reasons for claiming input tax in later periods, such as:
Recovery of input tax outside the proper period is subject to the Commissioners’ discretion under The VAT Regulations 1995, Regulation 29. HMRC will allow late claims to input tax in the above circumstances and in specific cases, provided HMRC is satisfied that allowing the late claims in a later period does not lead to overclaiming input tax or less tax being payable than if the input tax was claimed in the ‘proper period’.
HMRC will not exercise discretion to allow late claims of input tax on VAT returns in a later period where there is evidence of careless error or repeated late claims.
If tax is not deducted in the proper period due to an error, a business can recover the tax in a later period via The VAT Regulations 1995, Regulation 35 . More information on this subject and recent updates to the procedures here .