HMRC has updated its Guidance Check if you need to register as a digital platform operator.
This guidance now includes various examples of what may qualify as a digital platform.
Tag Archives: international-services
VAT: Where do I belong?
VAT Success Stories
Investment company
HMRC denied claims for input tax incurred on costs relating to the potential acquisition of an overseas business and threatened to deregister the plc as it was not, currently, making taxable supplies. Additionally, HMRC contended that even if VAT registration was appropriate, the input tax incurred did not relate to taxable supplies and was therefore blocked.
We were able to persuade HMRC that our client had a right to be VAT registered because It intended to make taxable supplies (supplies with a place of supply outside the UK which would have been taxable if made in the UK) and that the input tax was recoverable as it related to these intended taxable supplies (management charges to the acquired business). This is a hot topic at the moment, but we were able to eventually demonstrate, with considerable and detailed evidence that there was a true intention.
This meant that UK VAT registration was correct and input tax running into hundreds of thousands of pounds incurred in the UK was repaid.
Restaurant
We identified and submitted a claim for a West End restaurant for nearly £200,000 overpaid output tax. We finally agreed the repayment with HMRC after dealing with issues such as the quantum of the claim and unjust enrichment.
Developer
Our property developing client specialises in very high-end residential projects in exclusive parts of London. They built a dwelling using an existing façade and part of a side elevation. We contended that it was a new build (zero rated sale and no VAT on construction costs and full input tax recovery on other costs). HMRC took the view that it was work on an existing dwelling so that 5% applied and input tax was not recoverable. After site visits, detailed plans, current and historical photograph evidence HMRC accepted the holy grail of new build. The overall cost of the project was tens of millions.
Charity
A charity client was supplying services to the NHS. The issue was whether they were standard rated supplies of staff or exempt medical services. We argued successfully that, despite previous rulings, the supplies were exempt, which benefited all parties. Our client was able to deregister from VAT, but not only that, we persuaded HMRC that input tax previously claimed could be kept. This was a rather pleasant surprise outcome. We also avoided any penalties and interest so that VAT did not represent a cost to the charity in any way. If the VAT was required to be repaid to HMRC it is likely that the charity would have been wound up.
Shoot
A group of friends met to shoot game as a hobby. They made financial contributions to the syndicate in order to take part. HMRC considered that this was a business activity and threatened to go back over 40 years and assess for output tax on the syndicate’s takings which amounted to many hundreds of thousands of pounds and would have meant the shoot could not continue. We appealed the decision to retrospectively register the syndicate.
After a four-year battle HMRC settled on the steps of the Tribunal. We were able to demonstrate that the syndicate was run on a cost sharing basis and is not “an activity likely to be carried out by a private undertaking on a market, organised within a professional framework and generally performed in the interest of generating a profit.” – A happy client.
Chemist
We assisted a chemist client who, for unfortunate reasons, had not been able to submit proper VAT returns for a number of years. We were able to reconstruct the VAT records which showed a repayment of circa £500,000 of VAT was due. We successfully negotiated with HMRC and assisted with the inspection which was generated by the claim.
The message? Never accept a HMRC decision, and seek good advice!
VAT and the 2025 Budget
Budget 26 November 2025
There was not too much excitement in the budget for indirect taxes (there was no change to the registration threshold, nor any VAT rates), but there were some minor changes.
VAT Grouping
The rules relating to cross border VAT grouping will be clarified. From the Budget date of 26 November 2025′ the UK will revert to its previous position on grouping to restore the “whole establishment” principle. HMRC also published Revenue and Customs Brief 7 (2025): Revised VAT grouping rules and the Skandia judgment, confirming that HMRC now considers that an overseas establishment of a business VAT grouped in the UK should be treated as part of that VAT group, even when located in an EU member state that does not operate whole entity VAT grouping.
This means that services provided between a UK head office and its overseas branch will once again be disregarded for VAT purposes, even if the branch belongs to a VAT group in another jurisdiction.
HMRC acknowledges that some VAT groups may have accounted for VAT in line with the previous guidance and may now be eligible to reclaim overpaid VAT through the error correction notification procedure.
This HMRC brief provides more details.
Private hire vehicles
Suppliers of private hire vehicle and taxi services will be excluded from the scope of the Tour Operators’ Margin Scheme (TOMS) from 2 January 2026, except where these are supplied in conjunction with certain other travel services. The government also published a response to the Consultation on the VAT Treatment of Private Hire Vehicles and HMRC published Revenue and Customs Brief 8 (2025): VAT Tour Operators’ Margin Scheme — supplies by private hire vehicle or taxi operators, which explains how to account for VAT as a private hire vehicle operator, a taxi operator, or business re-selling such supplies.
E-invoicing
The government will require all VAT invoices to be issued in a specified electronic format from April 2029. An implementation roadmap will be published at Budget 2026 further to consultation with businesses.
VAT treatment of business donations of goods to charity
There will be a new VAT relief to be be introduced on 1 April 2026 for business donations of goods to charity for distribution to those in need or use in the delivery of their charitable services, ie; in addition to goods donated for sale. HMRC also published a response to the Consultation on the VAT treatment of business donations of goods to charity, and a policy paper, VAT relief for business donations on goods to charities. The relief will apply to goods valued up to £100 per item, with a higher £200 threshold for essential electrical items to help tackle digital poverty. Eligibility is strictly limited to registered charities, meaning community interest companies (CICs) and social enterprises are excluded unless they register as charities. This corrects an anomaly where there is no VAT liability when businesses dispose of goods to landfill, but may incur one when donating those same goods to charity.
Motability
From 1 July 2026, vehicles leased through the Motability Scheme will be subject to 20% VAT on top-up payments for more expensive vehicles which are made in addition to the transfer of eligible welfare payments for more expensive vehicles on the scheme. The standard rate of Insurance Premium Tax will apply to scheme insurance contracts: VAT and Insurance Premium Tax: change to reliefs for qualifying motor vehicle leasing schemes – GOV.UK There will be no changes to vehicles designed for, or substantially and permanently adapted for, wheelchair or stretcher users.
ATCS
The Government has confirmed that the ‘Advance Tax Certainty Service’ (ATCS) will launch in July 2026 and provide clearances on corporation tax, stamp taxes, VAT, PAYE and the construction industry scheme, where there is no existing statutory route to certainty.
Who can claim import VAT? The TSI Instruments case
Latest from the courts
In the First-tier Tribunal (FTT) case of TSI Instruments Limited the issue was whether the appellant could claim import VAT when it was not the owner of the imported goods. The amount of VAT at stake was circa £8.5 million.
Background
TSI Instruments (TSI) imported scientific equipment owned by its customers for repair. The main activity of TSI in the UK is the service, repair and calibration of TSI Group goods which had previously been sold to customers around the world.
TSI is named as the importer and paid the charges made by the shipping company for dealing with the declaration and customs clearance formalities on behalf of TSI as well as paying the import VAT which it claimed.
Contentions
HMRC refused to repay the claims on the basis that only the entity with title to the goods is able to deduct the import VAT.
The appellant argued there is no requirement in the legislation that the importer should be the owner of the goods in order for import VAT to be credited. TSI asserted that, as long as the goods are imported for the purposes of its taxable business and it bears the costs of the import, the import VAT can be credited as input tax.
Decision
The FTT ruled that TSI was not entitled to claim input VAT credit for import VAT paid on goods it did not own, and the appeal was dismissed. Via both EU and UK VAT law, the right to deduct import VAT is restricted to the actual owner of the goods or the entity which has the right to dispose of the goods as their owner (or where the cost or value of the goods is reflected in the price of specific output transactions or in the price of goods and services supplied in the course of their economic activities). Since TSI did not own the goods, and their value was not included in the repair service price, the FTT ruled against TSI.
Commentary
This position could have been avoided by planning being put in place. TSI could have used Inward Processing Relief or the owner of the goods could have been the importer.
Legislation/HMRC guidance
VIT13300 – Import VAT may only be claimed by the owner of the goods who would be entitled to reclaim the import VAT either in accordance with s24 VATA 1994 (if registered for VAT in the UK) or under part XXI of the VAT Regulations 1995 (SI 1995/2518) if they are not registered for VAT in the UK, provided they satisfy the legislative conditions. For further information see Notice 723A.
HMRC published Revenue and Customs Briefs 2 (2019) and Brief 15 (2020) which restated HMRC’s long-standing policy that it is the owner of the imported goods who is entitled to recover the import VAT under current UK legislation. These Briefs clarify, but do not change, HMRC’s policy.
Common VAT mistakes
VAT basics
None of us are perfect, and any business can make mistakes with VAT despite all intentions to take reasonable care. So what are the most common errors? Here’s a list of pitfalls to avoid:
Wrong rate of output tax charged
- The default position is that a supply is standard rated unless it is specifically reduced rated, zero-rated, exempt or outside the scope of UK VAT
Land and property transactions
- Misunderstanding the correct VAT treatment of a land and property transactions
- Not recognising VAT issues
- Issues with the Option To Tax
- TOGC issues
- A guide to triggerpoints here
Cross-border issues
- Failing to meet the requirements to zero-rate exports
- Incorrect import procedures
- Ignoring the reverse charge
Inter-company charges
- Misunderstanding the VAT treatment of management charges
Partial exemption
- Not recognising partial exemption
- Using an inappropriate method
- Failing to carry out the annual adjustment
- Failing to make Capital Goods Scheme adjustments
Business entertainment
- Different rules apply to the recovery of input tax on entertaining depending on the type of recipient, eg: clients, contacts, staff, partners and directors depending on the circumstances
Registration
- Late registration
- Exception from registration
- Misunderstanding pre-registration issues
- Failing to appreciate voluntary registration
- Deregistration issues
VAT groups
- Failing to VAT group when beneficial or failing to disband
- Recovery of input tax
- Timing of transactions
- Partial exemption issues
Tax points (Time Of Supply)
- Failing to recognise a tax point for output tax
- Incorrect treatment of deposits
- Incorrect treatment of forfeit deposits
- Recovery of input tax at incorrect time
Bad Debt Relief issues
- Failing to claim Bad Debt Relief
- Failing to repay a claim to HMRC when payment from customer is received
- Failing to repay input tax when a supplier is not paid (after six months)
Overseas issues
- Not recognising indirect tax obligations outside GB
- Not recovering VAT incurred overseas
- Place of supply misunderstandings
Claiming input tax without the correct documentation
- A guide to alternative evidence here
Recovering irreclaimable input tax
- A guide to what VAT is not claimable here
Return errors
- A box-by-box guide here
Business promotion schemes
- Incorrect treatment of vouchers, gifts and discounts
Composite or separate supplies
- Treating a composite supply as individual supplies, or vice-versa
Changes to a business
- Selling new products, acquisitions, share sales, disposals, re-structuring, and ceasing to trade can all have a VAT impact and this can be missed
Fuel and motoring costs
- Not applying Road Fuel Scale Charges correctly
- Incorrect input tax recovery on vehicle purchases/leases/repairs etc
Special schemes
- Failure to use the most suitable alternative schemes for accounting for VAT
One-off transactions
- Failing to recognise VAT issues of unusual or one-off transactions
Non-business (NB) and charitable activities
- Failure to recognise NB activities
- Failure to restrict input tax in connection with NB activities
Errors can lead to draconian penalties, and ignorance is not a defence.
A guide to VAT triggerpoints here .
I have to charge myself VAT?!
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: Tax representatives and tax agents – what is the difference and why it is important
VAT Basics
A Non-Established Taxable Person (NETP) may be required to appoint a tax representative or tax agent if they make taxable supplies in the UK. The term NETP is used to describe a person who is liable to be registered for VAT under the VAT ACT 1994 Schedule 1a. A NETP must register for VAT as soon as it makes its first taxable supply in the UK, or when it expects to make taxable supplies here within the next 30 days, that is; there is no turnover limit for a NETP.
A NETP is a business which has no place of belonging in the UK. So, what is the difference between a representative and agent, and does the NETP get a choice?
Tax representative
A representative maintains the NETP’s VAT records, submits VAT returns and accounts for UK VAT on behalf of the NETP and dels with communication with HMRC. A representative is jointly and severally liable for any VAT debts incurred by the NETP.
A NETP may only appoint one person at a time to act on its behalf, although a tax representative may act for more than one NETP.
Tax agent
An agent carries out a similar role to a representative, however, the important difference is that HMRC cannot hold an agent responsible for any of NETP’s VAT debts. HMRC reserve the right not to deal with any particular agent. In some circumstances, if HMRC deem think it necessary, it will insist that a tax representative is appointed.
As long as HMRC has not directed (see below) a NETP to appoint a tax representative, it can appoint an agent to deal UK VAT affairs. Any arrangement made will be subject to whatever contractual agreement the NETP and agent decide. In some circumstances, if HMRC think it is necessary, it may still insist that a tax representative is appointed.
Distinction
The tax representative and the tax agent both act on behalf of a NETP. However, while the tax agent operates in the name of the NETP, the tax representative operates in its own name. Consequently, a tax representative is personally committed to pay HMRC and must be accredited beforehand. Contracts between representatives/agents need to be clear on this point and fees charged for this work should reflect the difference in responsibilities. Should the NETP fail to pay VAT, penalties and interest due, HMRC will collect these directly from the tax representative, so, in effect, the tax representative represents a monetary insurance for HMRC.
Direction
HMRC can direct some NETPs to appoint a tax representative who must be:
- based in the UK
- fit and proper
this is via VAT Act 1994, section 48(1).
HMRC may choose to require some form of security from a NETP whether or not there has been any direction regarding the appointment of a representative.
Not appointing a tax representative or agent
If a NETP does not wish to appoint a tax representative or agent, and HMRC has not directed them to appoint a tax representative, it must meet all its obligations under UK VAT law itself. This includes, inter alia:
- registering for VAT
- keeping comprehensive record of all transactions in relation to business in the UK
- keeping records required to complete VAT returns
- producing records to HMRC for inspection
- paying the right amount of tax on time
Post Brexit
For UK businesses making overseas supplies:
Businesses established within the EU are exempted from appointing a tax representative in other Member-States (MS) as international tax assistance is compulsory within the EU (the local tax administration can request assistance from the country of establishment to recover the money directly from the business). Since Brexit, the UK became a third country, so this rule does not apply, and MS have the choice to make the appointment of a tax representative compulsory for UK businesses. Most MS have done so, the notable exception being Germany.
New guidance for registration of a NETP here.
VAT Success Stories
Investment company
HMRC denied claims for input tax incurred on costs relating to the potential acquisition of an overseas business and threatened to deregister the plc as it was not, currently, making taxable supplies. Additionally, HMRC contended that even if VAT registration was appropriate, the input tax incurred did not relate to taxable supplies and was therefore blocked.
We were able to persuade HMRC that our client had a right to be VAT registered because it intended to make taxable supplies (supplies with a place of supply outside the UK which would have been taxable if made in the UK) and that the input tax was recoverable as it related to these intended taxable supplies (management charges to the acquired business). This is a hot topic at the moment, but we were able to eventually demonstrate, with considerable and detailed evidence that there was a true intention.
This meant that UK VAT registration was correct and input tax running into hundreds of thousands of pounds incurred in the UK was repaid to our client.
Restaurant
We identified and submitted a claim for a West End restaurant for nearly £300,000 overpaid output tax. We finally agreed the repayment with HMRC after dealing with issues such as the quantum of the claim and unjust enrichment.
Developer
Our property developing client specialises in very high-end residential projects in exclusive parts of London. They built a dwelling using an existing façade and part of a side elevation. We contended that it was a new build (zero rated sale and no VAT on construction costs and full input tax recovery on other costs). HMRC took the view that it was work on an existing dwelling so that 5% applied and input tax was not recoverable. After site visits, detailed plans, current and historical photograph evidence HMRC accepted the holy grail of new build. The overall cost of the project was tens of millions.
Charity
A charity client was supplying services to the NHS. The issue was whether they were standard rated supplies of staff or exempt medical services. We argued successfully that, despite previous rulings, the supplies were exempt, which benefited all parties. Our client was able to deregister from VAT, but not only that, we persuaded HMRC that input tax previously claimed could be kept. This was a rather pleasant surprise outcome. We also avoided any penalties and interest so that VAT did not represent a cost to the charity in any way. If the VAT was required to be repaid to HMRC it is likely that the charity would have been wound up.
Shoot
A group of friends met to shoot game as a hobby. They made financial contributions to the syndicate in order to take part. HMRC considered that this was a business activity and threatened to go back over 40 years and assess for output tax on the syndicate’s takings which amounted to many hundreds of thousands of pounds and would have meant the shoot could not continue. We appealed the decision to retrospectively register the syndicate.
After a four-year battle HMRC settled on the steps of the Tribunal. We were able to demonstrate that the syndicate was run on a cost sharing basis and is not “an activity likely to be carried out by a private undertaking on a market, organised within a professional framework and generally performed in the interest of generating a profit.” – A happy client.
Chemist
We assisted a chemist client who, for unfortunate reasons, had not been able to submit proper VAT returns for a number of years. We were able to reconstruct the VAT records which showed a repayment of circa £500,000 of VAT was due. We successfully negotiated with HMRC and assisted with the inspection which was generated by the claim.
The message? Never accept a HMRC decision, and seek good advice!
VAT: Digital platform reporting
VAT and digital platforms
Via section 349 of the Finance (No.2) Act 2023, measures were introduced which require certain UK digital platforms to report information to HMRC about the income of sellers of goods and services on their platform. HMRC then exchange this information with the other participating tax authorities for the jurisdictions where the sellers are tax resident.
Under the Organisation for Economic Co-operation and Development (OECD) rules, digital platforms in participating jurisdictions will be required to provide a copy of the information to the taxpayer to help them comply with their tax obligations.
Now HMRC have recently (last month) issued a new series of guidance , or updated guidance, on digital platform reporting, which are:
Selling goods or services on a digital platform
This Guidance explains the details a business needs to give to digital platforms when selling goods or services in the UK. A section on what information sellers will receive from online platforms has been added.
It covers:
- who is a seller
- information which must be provided
- reporting by platforms
- information to be received
- selling online and paying tax
Check if you need to carry out digital platform reporting
This guidance provides information on:
- what qualifies as a digital platform
- who should register
- how to register
- what needs to be reported
- information required for reporting
- carrying out due diligence
- when to report
- penalties
Register to carry out digital platform reporting
This sets out:
- who should register
- what you need to do
- how to register
- after you have registered
Managing digital platform reporting
This provides guidance on:
- submitting reports to HMRC
- ongoing account management
- when to report
- how to add or change a platform operator
- how to add or change a reporting notification to tell HMRC if you are a reporting or excluded platform operator
- how to add or change a reporting notification about the type of due diligence you choose
- changing contact details
- how to add team members
- how to inform HMRC that another platform operator will report for you (assumed reporting)