Tag Archives: HMRC-publication

VAT and pension scheme services

By Marcus Ward 8 June 2026

In Revenue and Customs Brief 4 (2025) of June last year HMRC announced that employers can now reclaim all VAT incurred on investment costs linked to pension funds (they no longer need to split the costs with pension trustees). If trustees are providing pension fund management services and charging the employer, they can also claim back VAT on their costs, if they are VAT-registered.

HMRC have now updated its internal guidance on such input tax recovery. According to the new guidance, HMRC now consider for full recovery of VAT charged on any scheme-related service, sponsoring employers must have directly contracted for that service and HMRC no longer recognise any distinction between administration and investment services.

Updated VAT Notice 742A – Opting to tax land and buildings

By Marcus Ward 2 June 2026

HMRC has updated Notice 742A which explains the effect of an option to tax and will help a business decide whether to exercise that option. It also sets out whether an optor needs permission from HMRC before an option can be made and how to notify HMRC of a decision.

The update clarifies an important point: where opted land or building remain an asset on hand at the point of VAT registration cancellation, output tax must be accounted for on the value of that asset. The update also removes the information about a temporary change to the time limit for notifying an option as this has ended.

HMRC publish VAT receipts for the UK

By Marcus Ward 26 May 2026

HMRC has published the latest summary of HMRC tax receipts, National Insurance contributions (NICs), and expenditure for the UK. It includes historical receipts on a monthly and annual basis for all taxes administered by HMRC.

VAT highlights:

annual receipts over the last 20 years have grown from £77.4 billion in 2006 to 2007, to £180.7 billion in 2025 to 2026
receipts as a proportion of GDP over the last 20 years have grown from 5.2% in 2006 to 2007, to 5.9% in 2025 to 2026
annual receipts in 2020 to 2021 fell to £101.7 billion (from £129.9 billion the year before), and this fall can be attributed to the VAT payment deferment policy and the temporary reduced 5% rate for hospitality, holiday accommodation and attractions, alongside wider economic impacts of COVID-19
receipts in 2024 to 2025 are £171.0 billion and the relatively small growth from £168.4 billion in the previous year could be attributed a lower share of consumption on goods at the standard rate of VAT than was the case in 2023 to 2024
receipts in 2025 to 2026 are £180.7 billion (5.9% as a proportion of GDP) which could be attributed to the nominal tax base for VAT increasing due to inflation and policy measures.

VAT: Private schools guidance updated

By Marcus Ward 10 February 2026

HMRC has updated its guidance on charging and reclaiming VAT on goods and services related to private school fees.

Since 1 January 2025, all education services and vocational training provided by private schools in the UK for a charge have been subject to standard rated VAT.

The guidance explains how some payments and situations relating to education are treated for VAT. It covers how to check if VAT is due on payments linked to private school fees and what VAT can be reclaimed.

Updates

The example of parents contracting and paying therapists directly and the example of a school supplying education and therapy under separate fees have been updated to add clarity. Also, information on the VAT implications for fee-paying sixth forms and further education providers has been updated.

VAT Grouping: Protection of the Revenue

By Marcus Ward 9 December 2025

HMRC has updated VAT Notice 700/2 – Group and divisional registration.

The salient amendments are to the references to ‘protection of the revenue’ and ‘Revenue loss’.

VAT Groups

VAT grouping is a facilitation measure by which two or more entities can be treated as a single taxable person (a single VAT registration) for VAT purposes. The measure was once restricted to “Bodies Corporate” which includes; companies of all types and limited liability partnerships. However, from 1 November 2019, grouping is additionally available for all entities, including; partnerships, sole traders and Trusts in certain cases.

HMRC has the vires to refuse an application for a VAT group, or remove a member if HMRC consider that it may lead to a VAT loss.

The Change

“The definition of ‘protection of the revenue’

Where this is considered necessary for the protection of the revenue, the VAT grouping legislation gives HMRC the power to:

prevent a person joining a VAT group
remove an existing member from a VAT group

We usually will not use our protection of the revenue powers if the revenue loss follows from the normal operation of grouping. If we feel that the revenue loss does not follow the normal operation of grouping, then we would consider using our protection of the revenue powers, such as:

where we identify enhanced risks to the collection of revenue
the use of VAT avoidance and distortion in the liability of the group’s supplies

In this context, ‘revenue loss’ means the VAT that is not charged when one company in a group sells to another company in the same group. This usually happens when one or more companies in the VAT group cannot reclaim all the VAT they pay because they make supplies that are exempt from VAT.

We will use our revenue protection powers if it looks like the main reason for VAT grouping someone is to ignore supplies from that company’s overseas branches to other members of the VAT group.

This applies whether that person is established in the UK or has a UK fixed establishment”.

Form VAT 2 – registering a partnership updated

By Marcus Ward 7 October 2025

HMRC has updated is Form VAT2. The Form now requires each partner’s date of birth when an application to VAT register a partnership is made.

Guidance on registering partnerships here.

Registration of various legal entities – guidance here.

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: HMRC Annual report and accounts to 31 March 2025

By Marcus Ward 21 July 2025

HMRC has published its annual report and accounts 2024 to 2025 on 17 July 2025.

Highlights

Total tax receipts were £875.9 billion – a 3.9% increase from 2023/24
VAT revenue was £178.5 billion – an increase of £13.0 billion on 2023/24 figures
5,500 new compliance officers for HMRC
A focus on technology transformation including the use of AI
Aim to bring in an additional £7.5 billion per year by 2029/30 by an increased use of technology
Focus on improving ‘customer’ service (taxpayers!)
310 prosecutions brought as a result of our criminal investigations, securing 281 convictions
76.2% proportion of customer service interactions made through automated or digital self-serve channels
2.8 million number of new HMRC app users
30m+ VAT returns processed by Making Tax Digital for VAT
26-40 hours saved per year, on average, for each business using fully functional MTD for VAT software
78 million declarations made on HMRC Customs Declaration Service
£5.1 million financial penalties issued for non-compliance with money laundering regulations
HMRC three ongoing priorities:
- closing the tax gap
- improving day-to-day performance and the customer experience
- driving reform and modernisation of the UK’s tax and customs system .

VAT: Payments on account – updated guidance

By Marcus Ward 9 June 2025

HMRC updated its payments on account (POA) guidance in May 2025, The update includes information to support when a business should send a VAT return.

What are POA?

These are advance payments towards a business’s VAT bill. They are mandatory.

HMRC will notify a taxpayer to make POA if a business renders VAT returns quarterly, and it owes more than £2.3 million in any period of 12 months or less.

Under the POA arrangement, businesses make interim payments at the end of months two and three for each return quarter. The interim payment is intended to cover part of the overall VAT liability for the that quarter. The balancing payment for the return’s VAT liability will be settled when the business submits its VAT return payment. Quarterly VAT returns are filed online as normal.

POA calculation

HMRC will calculate POA based on a business’s annual VAT liability in the period that it goes over the threshold. The annual VAT liability in that period will be divided by 24 to arrive at an instalment amount.

A taxable person who has been in business for less than 12 months will have POA calculated by HMRC on a pro rata basis.

POA start date and annual cycle

The payments on account cycle starts in the first quarter after a business exceeds the £2.3 million threshold.

The payments will remain the same until the start of the next annual cycle.

The annual cycle begins in April, May or June depending on which VAT return ‘stagger’ a business is on. HMRC bases the amount of payments during the annual cycle on the liability in the period known as the ‘reference year’.

POA due dates

The due dates for POA are the last working day of the second and third months of every VAT quarter no matter what the period end date is. The seven-day extension for paying electronically does not apply to POA.

POA that are not paid on time will be subject to late payment interest.

Due dates for quarterly balancing payments

Balancing payments are due with the VAT return and must clear HMRC’s bank account by the last working day of the month if standard period end dates are used.

Late payments

If a business does not make POA or the balancing payment in full and on time HMRC will:

take immediate action to recover the debt
charge late payment interest
consider charging late payment penalties on amounts unpaid after the balancing payment due date
consider transferring a business from quarterly to monthly returns

Removal from a POA arrangement

If a business’s VAT liability falls below £2.3 million in the reference year HMRC will remove it from the arrangement six months later.

Alternative to payments on account

If making POA and submitting quarterly VAT returns does not suit a business, it can choose to make VAT returns and payments monthly.

Commentary

As may be seen, it is important to recognise the POA limit and to make payments on time. There is an obvious cash flow impact and plans should be put in place if the VAT turnover is nearing the threshold.

VAT: HMRC to close online forums

By Marcus Ward 2 May 2025

HMRC has announced that it will be closing its online forums and shifting to digital support with effect 30 June‌‌‌ 2025.

This decision has been taken as a result of increasing popularity of HMRC’s newer digital support (set out below) and to move towards a more modernised approach.

As an alternative to the previous forums, the following HMRC digital support channels can be used:

Webchat – an agent only channel which offers a faster alternative to telephony
@HMRCcustomers on X (formerly Twitter) – for general queries
Agent Talking Points webinars – for information on a range of subjects with opportunities for participants to submit questions
tax agents’ handbook – for information to help tax agents and advisers find guidance, use HMRC services and contact HMRC
service dashboard – for information on current service levels for post and online requests
Agent Updates – a monthly online digest of information specifically for the agent community