Category Archives: Technology

VAT: HMRC Tax Update 2026: Simplification, Modernisation and Fairness

By Marcus Ward 7 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 mobile phones – update

By Marcus Ward 3 July 2026

HMRC has updated Notice 700 to reflect the type of mobile ‘phone contracts and packages currently available and the VAT treatment of them. Details below, however, the salient issue with the update is that no input tax recovery is available if an employee has a contract in their own name (not the business itself).

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.

VAT: Public EV charging update

By Marcus Ward 18 May 2026

Further to the Charge My Street Limited case, which we considered here HMRC has published Policy Paper Revenue and Customs Brief 4 (2026): VAT liability of supplies of electricity from public electric vehicle charge points.

This paper sets out the VAT treatment of supplies of electricity from public EV charging points.

HMRC’s position remains that charging electric vehicles at public charge points is standard rated for VAT.

Supplies of fuel and power to a domestic premises are subject to the reduced rate of VAT at 5%. HMRC’s long-standing policy is that electric vehicle charge points located in public areas do not qualify as domestic premises and the standard rate of VAT applies to the supply of electricity at these locations.

The First-tier Tribunal found in favour of Charge My Street Limited. It concluded that Note 5(g) of Item 1 of Group 1 of Schedule 7A to the VAT Act 1994 covers supplies of electricity to an identified person at any identifiable premises, provided the total supplied does not exceed 1,000 kWh in a calendar month. The FTT clarified there is no additional requirement for the premises to be owned or controlled by the person receiving the supply, nor do the premises need to be buildings. This means locations such as public car parks may be included. The FTT decided that supplies of EV charging at public charging stations fell within the de minimis limit for supplies of electricity, and so were deemed to be for domestic use and, accordingly, subject to the reduced rate.

HMRC has applied for permission to appeal the First-tier Tribunal’s decision.

VAT: Crowdfunding – What is taxable?

By Marcus Ward 9 April 2026

What is crowdfunding?

Crowdfunding is the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the internet on specifically designed platforms and is an alternative to traditional ways of raising finance. The model is usually based on three parties: the project initiator who proposes the idea or project to be funded, individuals or groups who support the idea, and a moderating organisation (the “platform”) that brings the parties together to launch the idea.

Crowdfunding is a major, growing source of funding for startups, charities, and creative projects, with the global market predicted to grow annually by around 15% from 2026 to 2033 with platforms like Kickstarter, Seedrs, Crowdcube, and GoFundMe being major players.

VAT Treatment

The VAT treatment of supplies that might potentially be made is no different to similar financing arrangements, for example; sponsorship, donations and investments made through more traditional routes. Whether a recipient of crowdfunding is liable to charge and pay VAT depends on the facts in each case.

Examples

Donations

where nothing is given in return for the funding, it will be treated as a donation and not liable to VAT – the position is the same where all that the funder receives is a bare acknowledgement, such as a mention in a programme or something similar

Goods and/or services

where the funder receives goods or services that have a real value associated with them, for example; clothing, tickets, DVDs, film viewings, output tax will be due

Combination

where the payment is for a combination of the two examples above, if it is clear that the donation element is optional then that part of the sponsorship can be treated as a non-taxable donation and the supply will be taxable. If a donation element cannot be carved out, it is likely that all of the payment will be considered as VATable

Investment

where the funding takes the form of an investment where the funder is entitled to a financial return such as; interest, dividends or profit share, any payment due to the funder is unlikely to be liable to output tax, The reason why most of these arrangements are outside the scope of VAT is that the provision of capital in a business venture is not seen as a supply for VAT purposes

Royalties

if the arrangement is that the funder receives royalties based on a supply of intellectual property or some other similar benefit the payment is likely to be consideration for a taxable supply and output tax will be due

Loan-based

Individuals lend money to businesses or people for interest payments. The making of any advance or the granting of any credit is exempt.

VAT registration

If income from the sources above which are deemed to be subject to VAT exceeds the VAT registration limit (currently £90,000 in any twelve-month period) the person, in whichever legal identity, such as; individual, company, partnership, Trust etc will be liable to register for VAT. If income is below this limit, it will be possible, but not mandatory to VAT register. The benefits of voluntary registration here.

Input tax recovery

If VAT registered, any input tax incurred on costs relating to crowdfunding is usually recoverable (see here for exceptions). However, if the costs relate to donations or some types of investment then input tax claims are specifically blocked as they would relate to non-business activities. If exempt supplies are made, attributable input tax is generally blocked unless it is de minimis.

Commentary

There can be difficulties in establishing the tax liability of crowdfunding and in a broader sense “sponsorship” in general. However, experience insists that the biggest issue is initially identifying that there may be a VAT issue at all. If you, or your clients are involved in crowdfunding, or have sponsors, it would be prudent to review the VAT treatment of the activities.

Charging EVs at public stations is at 5% VAT – The Charge My Street case

By Marcus Ward 10 March 2026

Latest from the courts

Reduced VAT rate for public EV charging

In the First-tier Tribunal (FTT) case of Charge My Street Limited (CMS) the issue was whether the supply of electric vehicle (EV) charging in public places qualified for the reduced rate of VAT – 5%.

The appellant contended that the reduced rate applied to its supplies because they were provided at a premises and were below the de minimis – 1000 kilowatt hours (kWh) a month applicable to domestic use of electricity.

HMRC formed the view that these supplies were standard rated at 20% on the basis that what was being provided was not for ‘domestic use’. Furthermore, the de minimis was breached because the supply should be calculated by reference only to the period during which the electricity was actually being provided, rather than to a specific person at any premises in a month.

Legislation

The relevant legislation is found at The VAT Act 1994, Schedule 7A, Group 1, Item 1, Note 5(g),

Decision

The FTT found that ‘premises’ for this purpose did not require any concept of legal ownership by the recipient of the electricity, nor was it confined to buildings, but could include defined public spaces, such as car parks. The judge also accepted CMS’s argument that the de minimis limit is measured in terms of how much electricity is provided by a supplier to a person at any premises in the relevant month. It was accepted that public EV charging would always be under the 1000 kWh limit.

The FTT allowed appellant’s appeal in principle.

A VAT Did you know?

By Marcus Ward 25 February 2026

Energy saving: Insulation, solar panels, wind turbines, wood-fuelled boilers and air-source heat pumps are subject to a reduced rate of VAT at 5%, but the installation of secondary or double glazing is at the standard rate of 20%.

EU – Elimination of the threshold-based customs duty relief

By Marcus Ward 23 February 2026

The EU will abolish the rule that Customs Duty does not apply to low value goods (less than €150) entering the EU

It will impose a fixed Customs Duty of €3 from 1 July 2026, until completion of the EU data hub which is expected to be on 1 July 2028.

When operational, the data hub will enable Customs Duty to apply to all imported goods, regardless of value, on an ad valorem basis.

VAT: HMRC launches new online interactive tool for compliance checks

By Marcus Ward 19 August 2025

HMRC has introduced a new interactive tool which aims to help taxpayers with compliance checks.

The new free online Interactive Compliance Guidance tool can help businesses understand HMRC compliance checks. It aims to provide information and support about compliance checks (VAT inspections).

The tool provides information to help taxpayers understand:

HMRC compliance checks
why HMRC has requested specific information or documents
how to request extra support due to health or personal circumstances
how to appoint someone to act on your behalf
what to do if you disagree with a decision made by HMRC
how to pay a tax assessment or penalty.

It brings together existing compliance guidance and videos in one place, making it easier to find and navigate the appropriate information.

More on VAT inspections – How do HMRC choose which businesses to visit and what is “Connect”? here.

VAT: Transactions involving Bitcoin

By Marcus Ward 21 July 2025

I have written about this subject a number of times about transactions involving cryptocurrencies, and considering the increased use of them, it seems timely to provide an update on the VAT treatment of certain business activities which use Bitcoins as a value for exchange, or payment for goods or services.

What is cryptocurrency?

Cryptocurrency is a line of computer code that holds monetary value. Cryptocurrency is also known as digital currency and it is a form of money that is created by mathematical computations. In order for a Bitcoin transaction to take place, a verification process is needed, this is provided by millions of computer users called miners and the monitoring is called mining. Transactions are recorded in the blockchain which is public and contains records of each and every transaction that takes place. Cryptocurrency is not tangible, although they may be exchanged for traditional cash. It is a decentralised digital currency without a central bank or single administrator (which initially made it attractive) and can be sent from user to user on the peer-to-peer network without the need for intermediaries.

What is Bitcoin?

Bitcoin was the first popular cryptocurrency and it first appeared in 2009. The advantage of bitcoin is that it can be stored offline on the owner’s local hardware (a process called cold storage) which protects the currency from being taken by others. If a person loses access to the hardware that contains the bitcoins, the currency is lost forever, and it is estimated that as much as 23% of bitcoin has been mislaid by miners and/or investors.

Exchange between currencies and bitcoin

The VAT treatment of transactions exchanging traditional currencies for Bitcoin, or Bitcoin for currencies carried out for consideration (added by the supplier) are exempt services in a similar way to any other currency transactions via The VAT Act 1994, Schedule 9, group 5, item 1.

Paying for goods or services using Bitcoin

Similar to any other payment method, simply using Bitcoin to obtain goods or services is outside the scope of VAT and no VAT is due on the value the Bitcoin represents. That is to say that the authorities do not consider that such a transaction is a barter.

Provision of goods or services in return for Bitcoin payment

The provision of goods or services paid for in Bitcoin are treated in a similar way as any supplied for consideration consisting of

Traditional currencies, or
Non-monetary consideration

and the value is; anything received by the supplier in consideration of that supply.

Should the consideration be in Bitcoin, there two alternatives for the conversion of foreign currencies into a main currency (although these were drafted before the introduction of Bitcoin and originally relate simply to foreign currencies)

the latest exchange rate recorded on the most representative exchange market, or
the latest exchange rate published by the European Central Bank

However, as above, because Bitcoin is not administered by any bank, this may make valuation difficult. The VAT Committee of the European Commission (EC) has indicated that a potential resolution is to use Open Market Rate (OMR*) as the exchange of the virtual currency. This would be the responsibility of the supplier. This is likely to be commercially available information from the websites of the likes of; coindesk, Cryptocompare or Cointelegraph for eg.

All of the above seems logical, although confirmation provided by the VAT Committee is welcome.

* OMR is the amount for which an asset is transferred between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion.

VAT: e-invoicing consultation published

By Marcus Ward 13 February 2025

HMRC and the Department for Business and Trade have published their UK e-invoicing consultation paper.

Background to this development here and here.

E-invoicing is the digital exchange of invoice information directly between buyers’ and suppliers’ financial systems, even if these systems are different. The outcome is an invoice which is automatically written into the buyer’s financial system without manual processing.

E-invoicing automates the exchange of invoices between buyers and suppliers. The government says that increased e-invoicing uptake may support economic growth, business productivity, improve business cashflow and reduce errors in tax returns. It has the potential to both support businesses and tax administration.

The consultation aims to understand how e-invoicing aligns with businesses and their customers. Responses from businesses of all sizes – whether they use e-invoicing or not – as well as interest groups, representative bodies, industry bodies and individuals are encouraged.

The purpose of the consultation is to seek input on how the government can support the increased adoption of e-invoicing. The main points are:

different models of e-invoicing
whether to take a mandated or voluntary approach to e-invoicing
what scope of mandate might be most appropriate in the UK and for businesses
whether e-invoicing should be complemented by real time digital reporting

This would be a significant change to VAT and all businesses should understand the impact.

More on VAT in the Digital Age (ViDA), including Real-time digital reporting here.