Sweetened rice cakes are zero-rated, but savoury flavoured ones are VATable.
BUT… The problem area is salted rice cakes. Lightly salted cakes are considered to require further preparation before consumption (and are therefore zero-rated) whereas more heavily salted rice cakes do not and are standard rated. However, there is no guideline as to where this borderline falls .
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
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)
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.
All residential letting is exempt… except holiday lets, which are standard rated at 20%. So, what is the difference? After all a house is a house, but the VAT treatment depends on how the property is advertised or “held out”.
If a property is held out for holiday accommodation, then the rental income is taxable.
What is holiday accommodation?
Holiday accommodation includes, but is not restricted to; any house, flat, chalet, villa, beach hut, tent, caravan or houseboat. Accommodation advertised or held out as suitable for holiday or leisure use is always treated as holiday accommodation. Also, increasingly, it is common for farms and estates to have cottages and converted barns within their grounds, which are exploited as furnished holiday lets so this use must be recognised for VAT purposes. Residential accommodation that just happens to be situated at a holiday resort is not necessarily holiday accommodation.
This treats holiday lets the same way as hotels, inns and B&B were VAT applies, which is fair.
Off-season lettings
If holiday accommodation is let during off-season, it should be treated as exempt from VAT provided it is let as residential accommodation for more than 28 days and holiday trade in the area is clearly seasonal.
What does this mean?
If the letting business exceeds the VAT registration threshold, currently £90,000, it must register for VAT. This usually means that either the business would lose a sixth of its income to HMRC or its letting fees would increase by 20% – which is not usually an option in a particularly price sensitive market. The only upside to registration is that VAT incurred on costs relating to the letting (input tax) would be recoverable. This may be on expenditure such as; agents’ fees, maintenance, refurbishments, laundry, websites and advertising etc.
Agents
If a property owner provides a property to a holiday letting agent and the agent itself provides the letting directly to the end users, this does not avoid the standard rating, even if the agent pays a guaranteed rent to the freeholder. This can catch some property owners out.
Sale of the property
When the owner sells the property, although it may have been used for standard rated purposes, the sale is usually treated as exempt. However, zero rating may be available for the first sale or long lease if it is a new dwelling with no occupancy restrictions. The sale of a “pure” holiday property is likely to be standard rated if it is less than three years old. To add to the complexity, it is also possible that the sale may qualify as a VAT free Transfer Of A Going Concern (TOGC). These are important distinctions because they determine, not only if VAT is chargeable, but, if the sale is exempt, there is usually a clawback of input tax previously claimed, potentially visa the Capital Goods Scheme (CGS).
Overseas properties
A final point: please do not forget overseas property lets. My article here sets out the tax risks.
Summary
There are a lot of VAT pitfalls for a business providing holiday lettings. But for a single site business, unless the property is large or very high end, it is likely that the income will below £90,000 and VAT can be ignored. However, it is important to monitor income and costs to establish whether:
Lugworms and maggots are standard rated, unless they are also suitable for human consumption, in which case they may be zero-rated – Yum.
HMRC issued new guidance for businesses which sell goods using an online marketplace on 20 June 2025. It enables online marketplace (an e-commerce site that connects sellers with buyers where transactions are managed by the website owner) operators to check if a seller is established outside the UK, so that it can establish which party is liable for VAT on sales.
Background
An online marketplace operator is liable for VAT on goods of any value that are both:
The operator needs to establish who is liable for VAT on sales of goods which are facilitated. To confirm this, the operator needs to take all reasonable steps to check whether a seller is established outside the UK. A business is required to keep evidence to show that it has taken all reasonable steps.
This new guidance includes details about how to check where an online marketplace seller is established and provides information about checks and process businesses can put in place. HMRC will review this evidence and will consider all evidence which has been used to establish where the seller is established. In each case, it will consider:
Examples of checks
HMRC give the following examples of types of checks which might be undertaken to determine if an online seller is UK-established:
Overview of online sellers
More general guidance from HMRC on online sellers:
The rules aim to avoid VAT evasion by non-UK online sellers.
Latest from the courts
In the Walkers Snack Foods Ltd Upper Tribunal (UT) case the issue was whether Sensations Poppadoms are similar to potato crisps and consequently excluded from the zero rating for food.
The First-Tier Tribunal (FTT) found that the product was similar to crisps and that it was to be treated as being excepted items from zero-rating and was therefore standard rated.
Background
The salient matter was whether the poppadoms were “made from the potato, or from potato flour, or from potato starch” and were “similar” to potato crisps via The VAT Act 1994, Schedule 8, Group 1, item 1, excepted item 5.
Value Added Tax – excepted item 5 to item 1, Group 1, Part II, Schedule 8 Value Added Tax Act 1994 – whether First-tier Tribunal erred in law in finding Sensations Poppadoms were “made from the potato, or from potato flour, or from potato starch” and were “similar” to potato crisps
This sets out that the following is excepted from the zero rate for “Food of a kind used for human consumption”.
“5. Any of the following when packaged for human consumption without further preparation, namely, potato crisps, potato sticks, potato puffs, and similar products made from the potato, or from potato flour, or from potato starch, and savoury food products obtained by the swelling of cereals or cereal products; and salted or roasted nuts other than nuts in shell.”
Contentions
The appellant argued that the poppadoms should be zero-rated for VAT purposes because they fall within Item 1 of Group 1 as they are food, and that they are not included in the list of exceptions.
HMRC contended that that the product fell within excepted item 5 of Group 1, because they are products similar to potato crisps…
Decision
Consequently, for the above reasons the UT dismissed the appeal and the product is subject to the standard rate.
Commentary
Yet another case on the liability of ‘snack foods’. So now we know that: Doritos, Monster Munch, Wotsits and Poppadums are standard rated, however Pringles, Skips and Twiglets are VAT free. This demonstrates the complexity of classifying food and these decisions throw up more complications for producers as this market develops quickly as the public’s taste moves on.
The sale of ostriches is zero rated, but kangaroos are standard rated. Both are sold as food.
HMRC has updated its publication on the VAT official statistics from 2023 to 2024. It covers information on VAT receipts in the UK, statistics on the trader population and VAT registrations. The tables and commentary have been updated to reflect recent receipts.
Headlines
Latest from the courts.
In the Generic Maths Limited First Tier Tribunal case the issue was whether the appellant’s product; ‘ConquerMaths’ amounted to examination services so to be exempt via The VATA 1994, Schedule 9, Group 6, Item 3.
Background
Generic Maths provided an online tool which was intended to be of benefit to students or their parents/teachers. The following facts concerning ConquerMaths were found:
The issue
Simply put; was the product predominantly a tool that provides assessments enabling those using the product to determine what level of maths ability the student has reached and identify any gaps in knowledge and therefore an exempt supply since it falls into the category “examination services”? Or, as HMRC contended, was it an online mathematical tutorial tool which was standard rated as it was a composite supply the predominant element of which was education and that the supply was not one of examination services? (There was no argument that these were exempt educational services).
The tests
The FTT considered that the correct test for determining the nature of the appellant’s supplies was an objective test, based on how they would be characterised by the typical consumer. On that basis, ConquerMaths was a teaching product designed to improve maths understanding, not an examination service.
Additionally, if the correct test was rather a functional test, the result would be the similar.
Decision
The Tribunal did not consider that the product was a supply of examination services within Item 3. It found that the assessment had been made using best judgment by HMRC and accordingly that the appeal should be dismissed.
Commentary
This is probably the correct decision, although the examination and education exemptions are open to interpretation. Care should be taken by taxpayers that the exemption is correctly applied. Although the definition of examination services is wider than formal public examinations, it was not wide enough to encompass ConquerMaths.
Planning
The construction of a new house, and the materials used by the contractor to build it, are zero-rated. However, architect and other building professional fees, eg; surveyors, supervisors, engineers, project or construction management and consultants, are always standard rated; even in respect of a new build.
This will represent an absolute VAT cost to:
Aims
If it is not possible to structure matters so that these fees can be recovered (there are a number ways to do this, but not all will be available to all parties) then advisers need to consider ways to remove the VAT charge – this may also be preferable for cashflow purposes even if full input tax recovery is possible.
VAT Planning
Design and build – the steps
It is also possible to use an independent design and build company, or engage a contractor to carry out both the design and construction elements of the project with a similar result.
Considerations
It is important to implement the planning correctly. This means that appropriate contracts must be in place, the operation is carried out on sound business principles (actual supplies are made and it is not simply the moving of money).
Arrangements
In order to evidence the proper commerciality of the structure, it is important to bear in mind that:
HMRC’s view
In HMRC’s Internal Guidance Manual VCONST02720 it states that:
“Zero-rating the construction of buildings: services excluded from zero rating: design and build
Architectural or design services supplied as part of a design and build contract can be treated as part of the zero-rated supply of construction services.
A typical design and build contract will require the contractor to complete the design for the works and complete the construction of the works.
In such circumstances HM Revenue & Customs (HMRC) sees the design element as a cost component of the construction and not as a separate supply of architectural services which would be liable to VAT at the standard rate”.
Consequently, this planning is recognised and accepted by HMRC, however, it is important that it is applied effectively so it is difficult for HMRC to challenge.