Scottish snowballs VAT free, but if you buy Swedish snowballs, they are standard rated.
HMRC says its measure details the simplification of the CGS to reduce the administrative burden for VAT registered businesses.
From 29 July 2026:
HMRC has published Tax Update 2026: Simplification, Modernisation and Fairness which announces “a package of tax and customs measures to reduce administrative burdens, improve certainty, fairness, and customer experience”.
The main VAT matters are:
Digitising the option to tax process
The government will introduce new digital channels for submitting option to tax notifications and revocations, replacing existing paper-based processes. This change will make it easier for businesses and agents to manage VAT option to tax notifications, improving accuracy, reducing processing times and removing reliance on paper forms. It will incorporate industry requirements, including bulk uploads, for option to tax notifications, revocations and VAT registration cancellations. It will also support a more efficient and secure digital experience for taxpayers. These channels will be live before the end of 2026.
Direct Debit payments
HMRC is consulting on making Direct Debit the default payment method for VAT (and PAYE) return liabilities, with a shift away from manual bank transfers, CHAPS and Faster Payments which are currently the most used methods for business’ VAT settlement. This is presented as a simplification measure, but will require businesses to revisit treasury controls, mandates, and authorisation processes — particularly for groups with centralised treasury or multiple bank accounts.
Supplementary Data for VAT Returns
The government will explore whether better use of VAT data that businesses already hold in their digital accounting systems could help HMRC work more efficiently. This work will consider how data already held within the businesses’ digital accounting systems for audit purposes could be used to support compliance and improve the effectiveness of the tax system. Engagement with stakeholders will inform any future decisions.
Online Marketplace Liability
The government has published a consultation seeking views on the proposed extension of the VAT online marketplace liability rules to UK based businesses. The proposed reforms intend to tackle VAT non-compliance from overseas and UK based businesses which can distort competition and place compliant businesses, both online and on the high street, at a disadvantage. The government intends to minimise impacts on genuine UK businesses not required to pay VAT, and is seeking views on options to do so.
Electronic Sales Suppression Software Standards (ESS)
The government has published a consultation on the introduction of software standards for the Electronic and Mobile Point of Sale (EPOS/MPOS) Sector to explore how best to embed standards across the latest products and innovations. This consultation seeks views from businesses, software developers and wider stakeholders on measures designed to prevent electronic sales suppression and support fair competition on the high street. The government aims to ensure any future approach minimises burdens on compliant businesses, and believes that strengthened controls, such as modern encryption and record standardisation in the EPOS sector, have the potential to dramatically reduce the incidence of ESS or ‘till fraud’.
VAT on the purchase or lease of a mobile phone
If a business provides its employees with mobile phones for business use, it can treat the VAT it incurs on purchasing or leasing a phone as input tax. This includes line rental charges where applicable, regardless of whether private use is allowed.
VAT on mobile phone call package and other charges
Business only
If a business incurs a recurring fixed monthly fee covering a package of calls, SMS and data, HMRC accepts that all the input tax incurred is recoverable.
If a business does not allow its employees to make private calls, all of the VAT incurred on call charges is input tax. HMRC accepts this where the business has clear rules prohibiting private use and enforces those rules.
HMRC accepts minimal private use as insignificant for VAT purposes and will not prevent the business from recovering all the VAT incurred on calls and mobile phone packages as input tax.
Charges for private calls
If a business charges employees for private use of their mobile phone it may treat the VAT incurred on that use as input tax but must account for output tax on the amounts charged.
If a business allows private use without charge, it must apportion the VAT incurred and recover only the part that relates to business use.
Method of apportionments
Businesses can choose any apportionment method that suits their circumstances, provided it produces a fair and reasonable result.
VAT on broadband connections
Where a business enters into a contract and pays for a fixed monthly charge for a broadband connection either mobile or cable to an employee’s home to enable them to work remotely, input tax can be recovered on the cost of providing the connection. This also applies to routers, installation charges and call bundles.
Some private use usually occurs, eg; entertainment packages or out of bundle charges etc. In such cases an apportionment should be made to restrict input tax recovery to only the business use of the service.
Mobile phone or broadband costs bought by the employee.
Where a business pays for a mobile, broadband or a package contract entered into by an employee with the service provider, no input tax is recoverable by the business. This is because the contract for the supply of services is between the provider and the employee, meaning the supply is made to the employee rather than to the business.
If you buy a hamster or gerbil in a pet shop, you will pay tax on it but if you buy a rabbit, it will be VAT free.
VAT basics
Consignment, call-off stock, and sale or return goods
If a business is required to provide regular sales of goods to customers, a prudent business structure is to keep inventory in a warehouse near the customer, or which belongs to the customer. This is likely to reduce transport costs and provides quicker access to the goods thus reducing time in the supply chain. There are specific VAT rules for businesses which hold stock in foreign countries. They stipulate when, and what VAT should be charged, and if a business needs to VAT register as a non-resident trader in another country in which it is warehousing its goods.
Below we consider what the terms mean, the differences and the VAT treatment applicable.
Differences
There is often confusion over the terms; consignment and call-off stock, and they are sometimes used interchangeably. They are differentiated based on who controls access to, and use of, the goods. The difference determines the VAT requirements and compliance rules, so it is important to identify the actual arrangements a business has in place, or plan for the most beneficial outcome. Both of these measures involve the transfer of a business’ own goods – for the purposes of this article; cross-border. The transfer of goods within the same legal entity from one country to another is a deemed supply. This fact is sometimes missed, which can lead to problems. The VAT rules differ from country to country and create legal uncertainty for businesses.
In summary
Consignment stocks are created when a business transfers its own goods to another Member State to create a stock over which it has control and from which it makes supplies. Typically, there are multiple potential customers for consignment stock.
Note: Goods sent to an overseas customer on sale or return are treated in the same way as consignment stocks.
Call-off stock is the transfer of goods by a business from one Member State to another to create a stock of goods from which its customers can ‘call-off’ ie; use and pay for the goods as and when they require them.
Not call-off stock
Goods delivered to storage facilities operated by the supplier, rather than the customer, should be treated as consignment stocks (see above). If stocks of goods are dispatched by a supplier for call-off by more than one customer, this is also likely to be consignment stock.
VAT treatment
Consignment stock
There is an initial deemed supply of own goods to form the stock which takes place in the country from which the goods are originally shipped. This is usually VAT free as a dispatch and the usual documentary requirements apply.
The place of subsequent supplies of the goods, once a buyer has been found (change of ownership) is usually the country in which the stock is held.
Because the business is transferring its own goods “to itself” in another country it will be making an acquisition of goods in that country. The business is likely to be liable to register for VAT there (or appoint a fiscal representative in the country of arrival) and be responsible for import obligations in the other country. Output tax will also be due (at the rate of VAT applicable in the country in which the goods are located) on the sale to a third party.
Consignment stock – reporting requirements
If a UK VAT registered business transfers goods to another country to create a consignment stock it must complete box 6 on the VAT return reporting a value based on the cost of the goods – see HMRC Public Notice 725.
Call-off stock
As the customer has control of the goods in storage, is aware of stock movements, and may take stock whenever he requires this does not generally require the seller to VAT register in the foreign country as a non-resident trader. Such sales are treated as a “regular’ export and the seller is required to show the customer’s VAT number etc on invoices and other documentation in order to treat it as VAT free in the usual way. The time of supply for these supplies is the date the goods are called off by the customer.
Call-off stock – reporting requirements
The supply of call-off stock from the UK to a VAT registered business in another country is VAT free (subject to the normal rules). Box 6 of the VAT return should be completed using a value based on the cost of the goods as above.
HMRC Notice 700/65 has been updated. The ‘Business entertainment’ section has been amended to confirm persons who are, and are not, employees for the purpose of the recovery of input tax incurred on business entertainment.
A common day-to-day question is whether input tax incurred on entertainment is claimable. The answer to this seemingly straightforward question has become increasingly complex as a result of; HMRC policy, EU involvement, and case law.
I have looked at this subject in more depth here and this article also includes a helpful flowchart.
Salted nuts are standard rated, but packets of nuts which are still in their shells are VAT free.