Category Archives: Valuation

VAT: New, important HMRC guidance for zero-rating exports

By   10 March 2026
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HMRC has updated its Notice 703 which explains the conditions for VAT zero-rating exports of goods. It is crucial for a business to have the correct documentation to evidence goods physically moving out of the UK. 

Information on official evidence has been updated in paragraphs 6.2, 7.1 and 7.2 as follows:

  • Para 6.2 Official evidence

Official evidence is an export declaration for the goods submitted to the Customs Declaration Service which has generated a departure confirmation. You will need the Movement Reference Number (MRN) or Declaration Unique Consignment Reference (DUCR) of the declaration. 

  • Para 7.1 Air and sea freight 
  • If you are using commercial transport documents as proof of export for goods exported outside the UK or EU by:
    • air — you must obtain and retain an authenticated basic master airway bill or house air waybill endorsed with the flight prefix and number, and the date and place of departure
    • sea — you must keep one of the copies of the bill of lading or sea waybill along with a note of the export declaration Movement Reference Number (MRN) or Declaration Unique Consignment Reference (DUCR) or, where a shipping company does not issue these, a certificate of shipment (certifying actual shipment) along with a note of the export MRN or DUCR, given by a responsible official of that company.

  • 7.2 Road freight

    The international consignment note provides evidence of the identity of the contracting parties when goods are transferred by road. It is in 3 parts and is completed and signed by the sender of the goods, the carrier and the person receiving the goods. If the international consignment note is used as part of the evidence, it is important that the information is complete and all the details legible. Where the overseas customer arranges for the goods to be collected ex-works the international consignment note alone is not conclusive evidence that the goods in question have left the UK. Read paragraph 6.6 for additional evidence required when making an indirect export.

    Where goods leave through a port using the Goods Vehicle Movement Service, you should retain the Goods Movement Reference of the vehicle for that journey. 

Failure to produce the appropriate and accurate evidence will result in output tax being due on the relevant goods. 

VAT: Composite or separate supplies – The A & D McFarlane case

By   10 March 2026
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Latest from the courts

Yet more on composite or separate supplies. As a background to the issue please see previous relevant cases here here here and here. This is the latest the seemingly endless and conflicting series of cases on whether certain supplies are multiple or single. 

In the First-Tier Tribunal case (FTT) of Alan and Diane McFarland the appellants operated a ‘bed and breakfast’ for other people’s cattle.

The issue

The VAT issue was whether there were separate supplies:

  • zero-rated supply of animal food
  • exempt supply of land.

Additionally, the appellant contended that the supply of animal food was a principal supply, and everything else, including the land, was ancillary. 

HMRC took the view that there was a single taxable supply of ‘animal care’ and not separate supplies of exempt stabling and zero-rated feed. It also rejected the claim that the appellant had an exclusive right of occupation over any defined area, noting that there was no agreement conferring such a right with the consequence that this could not be an exempt supply. On the zero-rated animal foodstuffs point; HMRC concluded that the supplies do not qualify for zero-rating as the food provided formed part of the overall service of animal husbandry.

Legislation

  • Exemption: right over land or any licence to occupy land – The VAT Act 1994, Schedule 9, Group 1,  item 1
  • Zero-rating: animal feeding stuffs – The VAT Act 1994, Schedule 8, Group 1, Item 2.

Decision

The FTT found that there was a single standard rated supply of ‘looking after’ cattle. The supply made by the appellant fell squarely within the Levob (Levob Verzekeringen BV [C-41/04]) category, being so closely linked that they form, objectively, a single, indivisible economic supply, which it would be artificial to split. – HMRC notes on Levob here.

The supply was a fully integrated package of services directed towards the rearing and finishing of cattle. This included: daily mixing and provision of feed, management of water and housing, maintenance of handling facilities, statutory record‑keeping, and disease‑control obligations. These activities were inseparable in practice and indispensable for the operation of the recipient’s cattle‑finishing business. Neither the accommodation nor the feed, nor any other individual component, was offered or taken independently. There was a single price for the complete service. There was also a single invoice and a single description of the supply on the invoice. There was no indication on the invoice that both exempt and zero-rated services were being supplied.

The appellant provided a single composite service of animal rearing and management, to which all elements, including accommodation and feed, were merely constituent elements.

The Tribunal also dismissed the alternative argument of the that the supply of food was the principal supply, with all other elements, including accommodation and the wider activities being merely ancillary. The provision of food was not an aim in itself. The food could not sensibly be separated from the accommodation, handling, record-keeping and welfare-related functions that were also performed. It was, therefore, not the principal supply but an integrated component of the single composite supply.

The appeal was consequently dismissed.

Commentary

Yet another case on the perennial composite/single supply issue. This case was relatively straightforward and the outcome was no surprise. It is essential that businesses that potentially deal with agent/principal matters or make supplies at different VAT rates consider their position. Contracts, other documentation and the commercial reality need to be considered. We recommend that in such circumstances a review is carried out specifically to establish the correct VAT position .

EU – Elimination of the threshold-based customs duty relief

By   23 February 2026
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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: Repayment interest/commercial restitution

By   28 October 2025
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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. 

 

VAT: Overages – new guidance

By   6 October 2025
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HMRC has issued new internal guidance on overages.

Land and property transactions are often complex and high value for VAT purposes. One area which we have been increasingly involved with is overages.

What is an overage?

An overage is an agreement whereby a purchaser of land agrees to pay the vendor an additional sum of money, in addition to the purchase price, following the occurrence of a future specified event that enhances the value of the land. This entitles the seller to a proportion of the enhanced value following the initial sale. Overages may also be called clawbacks, or uplifts.

Overages are popular with landowners who sell with the benefit of development potential and with buyers who may be able to purchase land at an initial low price with a condition that further payment will be made contingent on land increasing in value in the future – this may be as a result, of, say, obtaining Planning Permission.

VAT Treatment

HMRC consider that the VAT liability of overage should be considered separately from the VAT liability of the initial sale. HMRC’s policy is that the VAT liability of an overage payment will generally be determined at the time of supply of the overage payment, rather than when the original land sale completed.

Overage payments where an option to tax is made after the initial grant – where an option to tax is made after the property has been sold to the buyer, any subsequent overage payment may be liable to the standard rate of VAT as a result of VAT Act 1994, Schedule 10, Paragraph 31 (unless the option to tax has been disapplied, eg; where a property intended for use as a dwelling). In such situations, where the overage payment is made after the dwellings are constructed on the land, and the original grant was taxable by virtue of the option to tax, the option can be excluded in relation to the overage payment.

New commercial buildings – overage payments:

  • Where there is a grant of a freehold interest in a new (or incomplete) commercial building, the overage will always be taxable at the standard rate – it does not become exempt simply because three years or more have elapsed since the building was completed. This will remain the position if the overage falls due after the designation ‘new’ has expired after three years.  
  • Where there has been a freehold sale of bare, un-opted land subject to an overage obligation, the liability of the overage payment will remain exempt even if a new commercial building is constructed on the site before the overage is paid. 

This means that the VAT liability of the overage is determined by reference to the description of the land at the time that the original sale of the land takes place. 

More on overages here. This covers HMRC’s previous views on overages .

VAT Bad Debt Relief Noticed updated

By   1 October 2025
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HMRC has updated VAT Notice 700/18 – Bad Debt Relief (BDR). The update covers how and when a claim may be made.

The Notice explains when a business is entitled to BDR and how to claim it.

If a business makes supplies of goods or services to a customer but it is not paid it may be able to claim relief from VAT on bad debts that it has incurred.

The conditions for claiming BDR are:

  • a business must have accounted for the VAT on the supplies and paid it to HMRC
  • a business must have written off the debt in its day-to-day VAT accounts and transferred it to a separate bad debt account
  • the value of the supply must not be more than the customary selling price
  • the debt must not have been paid, sold, or factored
  • the debt must have remained unpaid for a period of six months after the later of the time payment was due and payable and the date of the supply
  • the deadline is within four years and six months of the later of the date payment was due and payable or the date of supply

These rules have varied over the years, so it is worth checking on supplies made before 1 April 1989.

To claim BDR a business includes the amount of the VAT being claimed in box 4 of its VAT return which covers the date when the conditions to make a claim are fulfilled.

If BDR has been claimed and subsequently a payment is received for the supply, a business must repay HMRC the VAT element included in the payment.

I have to charge myself VAT?!

By   22 September 2025
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VAT Basics

I have to charge myself VAT?  How comes?!

Well, normally, the supplier is the person who must account to the tax authorities for any VAT due on the supply. However, in certain situations, the position is reversed and it is the customer who must account for any VAT due. Don’t get caught out!

Here are just some of the situations when you have to charge yourself VAT:

Purchasing services from abroad

These will be obtained free of VAT from an overseas supplier. What is known as the ‘reverse charge’ procedure must be applied. Where the reverse charge procedure applies, the recipient of the services must act as both the supplier and the recipient of the services. On the same VAT return, the recipient must account for output tax, calculated on the full value of the supply received, and (subject to partial exemption and non-business rules) include the VAT charged as input tax. The effect of the provisions is that the reverse charge has no net cost to the recipient if he can attribute the input tax to taxable supplies and can therefore reclaim it in full. If he cannot, the effect is to put him in the same position as if had received the supply from a UK supplier rather than from one outside the UK. Thus creating a level playing field between purchasing from the UK and overseas.

Accounting for VAT and recovery of input tax.

Where the reverse charge procedure applies, the recipient of the services must act as both the supplier and the recipient of the services.  On the same VAT return, the recipient must

  • account for output tax, calculated on the full value of the supply received, in Box 1;
  • (subject to partial exemption and non-business rules) include the VAT stated in box 1 as input tax in Box 4; and;
  • include the full value of the supply in both Boxes 6 and 7.

Value of supply: The value of the deemed supply is to be taken to be the consideration in money for which the services were in fact supplied or, where the consideration did not consist or not wholly consist of money, such amount in money as is equivalent to that consideration.  The consideration payable to the overseas supplier for the services excludes UK VAT but includes any taxes levied abroad.

Time of supply: The time of supply of such services is the date the supplies are paid for or, if the consideration is not in money, the last day of the VAT period in which the services are performed.

Deregistration

Any goods on hand at deregistration with a total value of over £1,000 on which input tax has been claimed are subject to a self supply. This is a similar mechanism to a reverse charge in that the goods are deemed to be supplied to the business by the business and output tax is due. However, in these circumstances it is not possible to recover any input tax on the self supply.

Flat Rate Scheme

There is a self supply of capital items on which input tax has been claimed when a business leaves the flat rate scheme (and remains VAT registered).

Domestic Reverse Charge (DRC)

The DRC makes supplies of standard or reduced rated construction services between construction or building businesses subject to the domestic DRC, which means that the recipient of the supply will be liable to account for VAT due, instead of the supplier. Consequently, the customer in the construction industry receiving the supply of construction services will be required to pay the VAT directly to HMRC rather than paying it to the supplier. It will be able to reclaim this VAT subject to the normal VAT rules. The RC will apply throughout the supply chain up to the point where the customer receiving the supply is no longer a business that makes supplies of construction services (a so-called end user, see below). More here. 

Mobile telephones and computer chips

In order to counter missing trader intra-community fraud (‘MTIC’), supplies of mobile telephones and computer chips which are made by one VAT registered business to another and valued at £5,000 and over are subject to the reverse charge. This means that the purchaser rather than the seller is responsible for accounting for VAT due.

Road fuel and power for private use 

When business fuel is used privately, self-supply charges apply based on HMRC’s published road fuel scale charges, applied per vehicle per quarter.

Alternatively, businesses can maintain detailed mileage records for actual business use percentage calculations. 

Land and buildings…. and motor cars

There are certain circumstances where land and buildings must be treated as a self supply… but that is a whole new subject in itself… as is supplies in the motor trade.

Even if the result of a self-supply or reverse charge is VAT neutral HMRC is within its rights to assess and levy penalties and interest in cases where the charge has not been applied; which always seems unfair.  However, more often than not simple accounting entries will deal with the matter…. if the circumstances are recognised and it is remembered to actually make the entries!

VAT & Import Duty

By   26 August 2025
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HMRC has updated its Guidance on How to claim a repayment of import duty and VAT if you have overpaid

It sets out how to check time limits and how to claim for importers, agents, freight forwarders or express operators. It also explains how to use the Customs Declaration Service or form C285 as an individual.

It covers:

  • who can apply
  • when to apply
  • how to apply
  • what you need — Customs Declaration Service
  • apply online — Customs Declaration Service
  • what you will need — C285 form
  • apply online — C285 form
  • what happens after the application

VAT: What is a TOGC? Why is it important?

By   19 August 2025
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What is a Transfer of a Going Concern (TOGC)?

Normally the sale of the assets of a VAT registered business will be subject to VAT at the appropriate rate. A TOGC, however is the sale of a business including assets which must be treated as a matter of law, as “neither a supply of goods nor a supply of services” by virtue of meeting certain conditions. It is always the seller who is responsible for applying the correct VAT treatment and will be required to support their decision.

Where the sale meets the conditions, the supply is outside the scope of VAT and therefore VAT is not chargeable.

The word ‘business’ has the meaning set out in The VAT Act 1994, section 94 and ‘going concern’ has the meaning that at the point in time to which the description applies, the business is live or operating and has all parts and features necessary to keep it in operation, as distinct from its being only an inert aggregation of assets.

TOGC Conditions

The conditions for VAT free treatment of a TOGC:

  • The assets must be sold as a business, or part of a business, as a going concern
  • The assets must be used by the transferee in carrying on the same kind of business, whether or not as part of any existing business, as that carried on by the transferor in relation to that part (HMRC guidance uses the words “intend to use…” which, in some cases may provide additional comfort)
  • There must be no break in trading
  • Where the seller is a taxable person (VAT registered) the purchaser must be a taxable person already or immediately become, as a result of the transfer, a taxable person
  • Where only part of a business is sold it must be capable of separate operation
  • There must not be a series of immediately consecutive transfers
  • Where the transfer includes property which is standard-rated, either because the seller has opted to tax it or because it is a ‘new’ or uncompleted commercial building the purchaser must opt to tax the property and notify this to HMRC no later than the date of the supply. This may be the date of completion or, if earlier, the date of receipt of payment or part payment (eg; a deposit). There are additional anti-avoidance requirements regarding the buyer’s option to tax

Please note that the above list has been compiled for this article from; the legislation, HMRC guidance and case law. Specific advice must be sought.

Property transfer

The sale of a property may qualify for TOGC if the above tests are met. Usually, but not exclusively, a TOGC sale is the sale of a tenanted building when the sale is with the benefit of the existing lease(s) – (the sale of a property rental business rather than of the property itself). Another example of a property TOGC is where a property under construction is sold (a development business). As may be seen, timing with a property TOGC is of utmost importance. For example, an option to tax one day late will invalidate TOGC treatment. A guide to land and property.

What purpose do the TOGC rules serve?

The TOGC provisions are intended to simplify accounting for VAT when a business changes hands. The main purposes are to:

  • relieve the buyer from the burden of funding VAT on the purchase, helping businesses by improving their cash flow and avoiding the need to separately value assets which may be liable at different rates or are exempt and which have been sold as a whole
  • protect government revenue by removing a charge to tax and entitlement to input tax where the output tax may not be paid to HMRC, for example, where a business charges tax, which is claimed by the new business but not paid by the selling business

What if it goes wrong?

TOGC treatment is not optional. A sale is either a TOGC or it isn’t. It is a rare situation in that the VAT treatment depends on; what the purchaser’s intentions are, what the seller is told, and what the purchaser actually does. All this being outside the seller’s control.

Add VAT when TOGC treatment applies:

Often, the TOGC point can be missed, especially in complex property transactions.

The addition of VAT is sometimes considered a “safe” VAT position. However, output tax will have been charged incorrectly, which means that when the buyer claims VAT shown on the relevant invoice, this will be disallowed. This can lead to;

  • potential penalties and interest from HMRC
  • the buyer having to recover the VAT payment (often the seller, having sold a business can be difficult to track down and then obtain payment from)
  • significant cash flow issues (HMRC will need to be repaid the input tax claim immediately)
  • if a property sale, SDLT is likely to be overpaid

Sale treated as a TOGC when it is a taxable supply:

When VAT free TOGC treatment is applied to a taxable supply (possibly as one, or more of the TOGC conditions are not met) then there is a tax underdeclaration. The seller will be assessed by HMRC and penalties and interest are likely to be levied. There is then the seller’s requirement to attempt to obtain the VAT payment from the buyer. Similarly to above, this is not always straightforward or possible and it may be that the contract prohibits additional payment. There is likely to be unexpected funding issues for the buyer if (s)he does decide to make the payment.

Considering the usually high value of sales of businesses, the VAT cost of getting it wrong can be significant.

Summary

This is a complex area of the tax and an easy issue to miss when there are a considerable number of other factors to consider when a business is sold. Extensive case law (example here and changes to HMRC policy here) insists that there is often a dichotomy between a commercial interpretation of a going concern and HMRC’s view. I sometimes find that the buyer’s intentions change such that the TOGC initially applied becomes invalid when the change in the use of assets (from what was notified to the seller) actually takes place.  HMRC is not always sympathetic in these situations. One of the questions I am often asked is: “How long does the buyer have to operate the business after purchase so that TOGC treatment applies?” Unsurprisingly, there is no set answer to this and HMRC do not set a specific period. My view, and it is just my view, is that an absolute minimum time is one VAT quarter.

Contracts are important in most TOGC cases, so it really pays to review them from a VAT perspective.

I very strongly advise that specialist advice is obtained in cases where a business, or property is sold. And yes, I know I would say that!

VAT: The United Carpets case – single of multiple supplies?

By   5 August 2025
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Latest from the courts

Yet more on composite or separate supplies. As a background to the issue please see previous relevant cases here here here and here. This is the latest the seemingly endless and conflicting series of cases on whether certain supplies are multiple or single. 

In the First-Tier Tribunal case (FTT) of United Carpets (Franchisor) Limited (UC) the issue was whether the appellant made a single supply of flooring and fitting or whether there were two separate supplies

Background

UC is a retailer of flooring (including carpets, underlay, vinyl and wood flooring), as well as beds. A customer who purchased flooring from the appellant was given the option to have an independent, self-employed, fitter to carry out the fitting of the purchased flooring. Each store has a pool of fitters who take on fitting work referred to them by the appellant. If the customer chooses, the fitter will attend the customer’s home to fit the flooring, as directed by the customer. The fitter is then paid by the customer for that work, with the money being received and retained, in full, by the fitter.

The fitters are self-employed and they use their own tools, and drive their own vehicles. They also have their own public liability insurance and are not covered by any of the appellant’s insurance policies. They are not paid by the UC and are not on the UC’s payroll. Since they are self-employed, the fitters have no ongoing obligations to the appellant (or vice versa) and can take on referrals as they please. The appellant does not hold any formal records for the fitters and is not aware of how much the fitters earn by way of the referrals. The rates charged by the fitters are determined by the fitters themselves.

The appellant’s Terms and Conditions of Sale included the following statements:

“The carpet fitting and delivery services provided by the Installer are supplied under a separate contract from the supply of goods to the Customer by the Company (UC). The Company is not responsible for the delivery or fitting of the Goods to the Customer.

“Full payment for the fitting services is due upon fitting payable by cash or cheque directly to the Installer. As detailed on the invoice, payment for the carpet fitting is made directly to the Installer under a separate contractual agreement between the Customer and the Installer…”

The issue

Whether the supplies of fitting services made to customers following the referral to the fitter by UC were supplies made by the self-employed carpet fitters who performed the services, or by UC as a single supply of flooring and fitting such that output tax was due from UC on both the retail sales and the fitting fees.

Contentions

HMRC determined that the appellant had incorrectly treated the supply of carpet fitting and contended that it supplied fitting services via sub-contractors and assessed the appellant for output tax on the fitting fees. HMRC further contend that the appellant made those supplies as part of a single supply, comprising both the flooring and the fitting services. Assessments were raised to recover the deemed underdeclared output tax.

UC’s position is that the self-employed fitters were completely independent, and that the fitting services do not form a single supply. Consequently, VAT was only due on the retail sales and not the fitting income.

Decision

The FTT concluded that there were two separate supplies:

  • the supply of goods by UC to the customer, and
  • the supply of services by the fitter to the customer.

After a review of the contractual documentation and the economic and commercial reality, the court was satisfied that there were three agreements:

  • between UC and the customer
  • between UC and the fitter
  • between the fitter and the customer

The fitter provided services to the end consumer who was liable to pay the fitter.

Consequently, the appeal was allowed, and the assessments were set aside.

A significant amount of case law was cited (a list too long to reproduce here) but included were the cases of: Secret Hotels 2 Limited v HMRC; All Answers Ltd v HMRC and Tolsma v Inspecteur der Omzetbelasting Leeuwarden which were considered and applied.

Commentary

Yet another case on the perennial composite/single supply issue. This case was more straightforward than many on this subject and the outcome was no surprise. It is essential that businesses that potentially deal with agent/principal matters or make supplies at different VAT rates consider their position. Both contracts, other documentation and the commercial reality need to be considered. We recommend that in such circumstances a review is carried out specifically to establish the proper VAT position .