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Welcome to this Issue of Deeks VAT Newsletter    

July 2025 issue 62

Keeping you up to date on VAT changes        

  In this month’s newsletter we cover the following: 

Solent Pathway Campus Limited: College of a University – FTT 

Rushby Dance and Fitness Centre & Others: Application of the VAT Exemption for Private Tuition – FTT 

HMRC Policy Change: VAT Deduction on Pension Fund Management 

HMRC VAT Notice 700/11 Update: Key Changes Explained 

VAT Registration: Are You Ready for the Threshold? 

Do You Have to Charge Yourself VAT? 

Latest from the Courts 

Solent Pathway Campus Limited: College of a University – FTT 

Solent Pathway Campus Limited (SPCL), a joint venture between Solent University and QAHE (Solent) Limited, successfully argued that its education courses were VAT-exempt. 

The Dispute SPCL claimed VAT exemption on two grounds:  

• As an eligible body providing education (college of a UK university)  

• Alternatively, as a provider of Teaching English as a Foreign Language (TEFL) 

HMRC rejected both claims, leading to the tribunal appeal. 

The Decision The First-tier Tribunal (FTT) ruled in SPCL’s favour on both arguments. 

College Status  

Applying the Supreme Court’s five-factor test from SAE Education Ltd, the FTT determined SPCL qualified as a college of the University. Key factors included:  

• Clear relationship between SPCL students and the University  

• SPCL’s activities were recognised by and integrated with the University 

This established SPCL as an eligible body for VAT exemption purposes. 

TEFL Alternative  

The FTT also accepted SPCL’s alternative TEFL argument, finding single composite supplies based on:  

• Course content designed for non-native English speakers  

• Student characteristics (international students progressing to UK degree courses)  

• Qualified tutors delivering specialised language instruction 

Outcome  

The FTT allowed SPCL’s appeal, confirming VAT exemption for its education services. 

This case reinforces the importance of demonstrating genuine integration with universities for VAT exemption claims and clarifies TEFL supply classification.  

Rushby Dance and Fitness Centre & Others: Application of the VAT Exemption for Private Tuition – FTT 

The First-tier Tribunal (FTT) has delivered important guidance on VAT exemptions for private tuition, considering four related appeals involving dance and fitness instructors. 

The VAT Exemption Rule 

VAT exemption applies to private tuition in subjects ordinarily taught in schools or universities, provided by individual teachers acting independently of an employer. 

The Disputes 

HMRC refused to recognise VAT exemptions for dance and fitness classes, leading to four separate appeals against compulsory VAT registration. 

Key Issues Examined 

1. Subject Matter Test (Three Appeals) 

The main question: Do dance and fitness classes constitute subjects “ordinarily taught in schools”? 

The FTT’s Decision: 

The tribunal ruled that the classes did not qualify for exemption because: 

• The dance classes offered were not the same as dance subjects commonly taught in schools 

• There was insufficient evidence that these specific activities were ordinarily part of school curricula 

2. Independence Test (Fourth Appeal) 

The question: Were the appellants acting independently, rather than as employees? 

This case involved members of a Limited Liability Partnership (LLP) and whether they were: 

• Acting on their own account 

• Operating at their own risk 

• Genuinely independent of an employer 

The FTT’s Decision: 

The appellant succeeded on the independence principle, but the parties agreed that further discussions were needed to determine the specific VAT treatment of individual classes. 

Key Takeaways 

• Specificity Matters: Generic “dance” exemption doesn’t automatically apply to all dance-related activities 

• School Curriculum Test: Activities must genuinely reflect what’s commonly taught in educational institutions 

• Independence Requirements: LLP members can potentially qualify as independent teachers 

• Case-by-Case Assessment: Each type of class may require individual evaluation 

Implications for Fitness and Dance Instructors 

This decision emphasises the importance of carefully assessing whether specific classes genuinely match school curriculum subjects before claiming VAT exemptions. g VAT exemptions. 

HMRC Updates 

HMRC Policy Change: VAT Deduction on Pension Fund Management 

HMRC has published Revenue and Customs Brief 4 (2025), announcing a significant policy change regarding VAT deductions for pension fund management costs. 

The Change HMRC is eliminating the current dual use apportionment system (70/30 split) for investment costs shared between employers and trustees. Under the new policy, all associated input tax will be treated as the employer’s and will be deductible by the employer, subject to normal deduction rules. 

Key Benefits  

• Increased VAT recoverability on both investment and administration costs  

• Simplified VAT accounting processes – no more complex apportionment calculations  

• Enhanced deduction rights for trustees supplying pension fund management services to employers 

Implementation  

The new policy takes effect from 18 June 2025. 

HMRC will publish additional guidance on the new policy by Autumn 2025. 

Impact This policy change represents a potential significant improvement in VAT recovery for employers managing defined benefit pension funds, whilst reducing administrative complexity. complexity. 

HMRC VAT Notice 700/11 Update: Key Changes Explained 

HMRC has updated VAT Notice 700/11 “Cancelling your VAT registration” with several important changes that affect businesses looking to deregister from VAT. 

What’s Changed: 

Legislative Reference Updates Section 1.2 has been amended to remove the reference to Schedule 2 of the VAT Act 1994 and now includes references to Schedules 9ZA and 9ZC instead. This reflects changes in the underlying VAT legislation structure. 

Final Return Deadline Extensions The notice now includes information about directions made under Regulation 25(4AA) of the VAT Regulations 1995, which allows HMRC to extend the due date for submitting final VAT returns in certain circumstances. 

Timeline Changes The research shows that HMRC has also updated processing timelines across multiple VAT notices, including 700/11, moving away from previously quoted 30-day timeframes to more flexible arrangements. 

Why This Matters: 

These updates provide businesses with: • Greater flexibility when submitting final returns during deregistration • Updated legal framework reflecting current VAT legislation • Clearer guidance on the deregistration process 

Official Source: The updated notice is available on the GOV.UK website. 

What Businesses Should Do: 

If you’re considering VAT deregistration or are currently in the process, review the updated notice to ensure you’re following the latest requirements. The changes particularly affect final return submission deadlines and may provide additional flexibility in your deregistration timeline. e. 

VAT Registration: Are You Ready for the Threshold? 

With VAT registration required at £90,000 turnover, many businesses find themselves unprepared when they With VAT registration required at £90,000 turnover, many businesses find themselves unprepared when they cross this crucial threshold. Unlike annual assessments, HMRC requires monthly monitoring of your rolling 12-month turnover. 

Common Registration Pitfalls:  

• Hidden turnover elements often catch businesses off-guard  

• Equipment rentals, personal use of assets, and zero-rated supplies all count  

• Overseas suppliers face immediate registration with no threshold protection  

• Late registration penalties escalate from 5% to 15% depending on delay 

Key Deadlines:  

You have just 30 days from month-end to register once the threshold is breached. Your VAT obligations begin the following month, creating tight timelines for compliance preparation. 

Forward Planning:  

Expected turnover exceeding £90,000 within 30 days triggers immediate registration requirements, regardless of historical performance. Large contracts can push businesses over unexpectedly. 

Relief Options:  

Temporary spikes may qualify for exception relief if you can demonstrate future turnover will remain below £88,000 annually. 

Getting It Right:  

Proper planning prevents penalty exposure and maintains smooth customer relationships. Understanding your obligations before reaching the threshold allows for better preparation and communication. 

📖 Read our comprehensive VAT Registration Guide for detailed guidance on thresholds, deadlines, and compliance requirements. 

Need help assessing your VAT position? Our specialists can review your circumstances and ensure you’re fully prepared. 

Do You Have to Charge Yourself VAT? 

Most businesses know suppliers charge VAT to customers, but did you know there are situations where you must charge VAT to yourself? These “reverse charge” and “self-supply” rules catch many businesses off-guard. 

Key Scenarios Where You Charge Yourself VAT: 

Services from Abroad

Purchasing services from overseas suppliers requires you to account for VAT through the reverse charge mechanism on your VAT return. 

Construction Industry

Since March 2021, construction services between VAT-registered businesses use domestic reverse charge – the customer, not supplier, accounts for VAT. 

High-Value Electronics

Mobile phones and computer chips worth £5,000+ between VAT-registered businesses trigger reverse charge obligations. 

Business Changes

• Leaving VAT registration creates self-supply charges on remaining stock over £1,000
• Exiting the Flat Rate Scheme triggers capital goods adjustments
• Property transactions often involve complex self-supply rules 

International Trade

Post-Brexit import rules mean different VAT obligations depending on where goods originate. 

The Penalty Risk

Even when these charges result in VAT-neutral positions, HMRC can still assess penalties and interest for non-compliance. Many businesses don’t realise they have these obligations until it’s too late. 

Common Mistakes:

• Missing overseas service purchases
• Incorrect construction industry invoicing
• Poor record-keeping for international transactions
• Delayed recognition of obligations 

📖 Read our complete guide to reverse charge and self-supply VAT rules for detailed guidance on all scenarios, compliance requirements, and best practice recommendations. 

Getting these rules wrong can be costly. If you’re unsure about your obligations, our VAT specialists can review your circumstances and ensure full compliance. 

Need specialist VAT guidance? Contact Jane Deeks at Deeks VAT Consultancy for professional advice across all industries. 

jane@deeksvat.co.uk | 07710553831 | LinkedIn