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Welcome to this Issue of Deeks VAT Newsletter    

August 2025 issue 64

Keeping you up to date on VAT changes            

In this month’s newsletter we cover the following: 

Performance Leads Limited V HMRC

Conservatory Insulations Northwest V HMRC

HMRC Update: Pension Fund Management Gets a VAT Boost 

HMRC Transformation Roadmap – What’s Changing by 2030? 

Flat Rate VAT Scheme Explained – Is It Right for Your Business? 

Claiming VAT on Business Entertainment and Staff Expenses – What You Need to Know 

Latest from the Courts 

Performance Leads Limited: When Lead Generation Meets VAT Exemption 

The Setup: Performance Leads Limited (PLL) runs websites connecting people seeking financial advice with FCA-authorised independent financial advisers. The IFAs pay PLL a fee for each lead generated. For years, PLL charged 20% VAT on these services, treating them as standard-rated advertising. 

The Plot Twist: PLL had a lightbulb moment and realised their services might actually qualify for VAT exemption as “financial intermediary services” under the VAT Act. They submitted an error correction notice claiming back £247,407 in overpaid VAT. 

HMRC’s Response: “Not so fast!” said HMRC, arguing that: 

• PLL couldn’t prove the leads resulted in exempt financial services 

• Their activities were just advertising (which is explicitly excluded from exemption) 

• They weren’t doing “work preparatory to the conclusion of contracts” 

The Tribunal’s Verdict: The First-tier Tribunal sided firmly with PLL, finding that their services went far beyond simple advertising. PLL was: 

• Meaningfully filtering user enquiries 

• Ensuring only relevant, monetisable leads reached IFAs 

• Acting as genuine intermediaries bringing parties together 

Crucially, since most IFA services fall under Item 6 of the VAT exemption, there was no requirement for PLL to perform “work preparatory to contracts” anyway. 

The Sting in the Tail: The Tribunal wasn’t impressed with HMRC’s conduct. After agreeing the legal issues at an Alternative Dispute Resolution meeting, HMRC tried to introduce new arguments later – earning them a judicial telling-off for “undesirable” procedural practice. 

What This Means: This case draws a clearer line between standard-rated advertising and exempt financial intermediary services. The key? Genuine filtering and meaningful connection services can tip the balance towards exemption. 

Our Take: It’s worth watching whether HMRC appeals this one – they might not be too happy about losing £247,407 plus the procedural criticism! 

Conservatory Insulations Northwest: When HMRC’s Own Red Tape Trips Them Up 

The Story: Conservatory Insulations Northwest Limited (CIN) did everything right. They spotted their own VAT errors totalling £54,468, submitted an error correction notice on 15 July 2022, and waited patiently for HMRC to process it. 

What Went Wrong: HMRC promptly… lost the paperwork.  

When CIN’s agent chased it up nearly a year later, HMRC found the replacement notice and got to work. An officer completed the assessment form on 27 June 2023, but it needed a senior officer’s countersignature (HMRC’s own internal rule). That signature finally happened on 18 July 2023, and CIN received the assessment on 22 July 2023. 

The Legal Battle: Here’s where it gets interesting. HMRC has just one year from receiving sufficient evidence to issue a VAT assessment. CIN argued the assessment was made when the countersignature was completed (18 July) or when issued (22 July) – both outside the one-year deadline. 

HMRC’s defence? – We made the assessment on 27 June when our officer first completed the form! 

The Tribunal’s Response: – Nice try, HMRC, but your own rules require senior approval. No signature = no valid assessment. 

The Tribunal ruled the assessment was made on 18 July 2023 – three days too late. Appeal allowed, £54,468 plus interest lost to the exchequer. 

The Really Frustrating Bit: HMRC didn’t just lose gracefully. They: 

• Applied to strike out CIN’s appeal (refused by the Tribunal) 

• Argued they had no jurisdiction to hear the case 

• Claimed CIN had “no reasonable prospect of success” 

• Forced everyone through an expensive hearing process 

The Irony: CIN voluntarily reported their own errors, HMRC lost the paperwork, missed their own deadline, then spent taxpayer money fighting a losing battle in court. 

What This Means: HMRC must follow their own procedures and statutory deadlines. When they don’t, taxpayers have strong grounds for appeal – even when the underlying tax is genuinely due. 

Our Take: Sometimes HMRC’s biggest enemy is HMRC. This case cost everyone time and money that could have been avoided with a simple “oops, our mistake” admission. 

HMRC Updates 

HMRC Update: Pension Fund Management Gets a VAT Boost 

The Big News: HMRC has just published Revenue and Customs Brief 4 (2025), announcing a significant policy shift on VAT deductions for pension fund management costs. This follows a European Court of Justice decision that’s been years in the making. 

What’s Changed: Old Rule: When employers and pension trustees both used investment management services, you had to split the input VAT deduction between them using a “fair and reasonable” apportionment method. Think of it as dividing the bill at a restaurant where everyone ordered different things. 

New Rule: HMRC now says there’s no “dual use” at all. All the input VAT on investment costs belongs to the employer and can be deducted by them (subject to normal VAT rules). It’s like the employer picking up the entire restaurant bill. 

The Trigger: This change stems from the Court of Justice decision in Fiscale Eenheid PPG Holdings BV (C-26/12) – a case that’s taken over a decade to filter through to UK policy.  

The Catch: HMRC’s brief is frustratingly light on detail. It’s essentially a headline announcement saying “things have changed” without explaining exactly which costs qualify or how the new rules work in practice. 

What’s Next: HMRC promises more detailed guidance is coming. We’re hoping this will clarify: 

• Which specific costs qualify for employer deduction 

• How this affects existing apportionment arrangements 

• Whether retrospective claims are possible 

Our Take: This could be a significant win for employers managing pension schemes, potentially freeing up substantial VAT deductions that were previously shared or restricted. However, the devil will be in the detail of the forthcoming guidance. 

Action Point: If you’re involved in pension fund management, it’s worth reviewing your current VAT treatment and keeping an eye out for HMRC’s promised detailed guidance. 

HMRC Transformation Roadmap – What’s Changing by 2030? 

On 21 July 2025, the Exchequer Secretary to the Treasury, James Murray, announced HMRC’s Transformation Roadmap — a long‑term plan to modernise the UK tax and customs system. 
The vision: by 2030, 90% of customer interactions will be digital. The roadmap focuses on three main priorities: 

• Improving day‑to‑day performance and customer experience. 

• Closing the tax gap. 

• Reforming and modernising the tax and customs system. 

Key Measures in the Roadmap 

• Closing the tax gap – tackling legal interpretation disputes through clearer guidance and potential legislative changes, plus increased use of digital tools, automation, and AI. 

• Debt reduction – updated tax debt strategy by end of 2025, aiming to reduce debt as a share of receipts year on year. 

• Cracking down on fraud – targeting the most harmful tax frauds, with annual charging decisions increasing to 600 by 2030. 

• Raising standards for tax intermediaries – stronger oversight of tax advisers and new requirements for registration and client authorisation. 

• Making Tax Digital (MTD) – phased rollout for sole traders and landlords earning over £20,000 by 2028, plus work on extending e‑invoicing across UK businesses. 

• Enhanced data use – better quality third‑party data, modernised acquisition methods, and pre‑population of tax returns. 

Digital and Compliance Changes 

The roadmap also promises: 

• GOV.UK One Login as the single sign‑in for government services. 

• A linked Digital Wallet to store and share verified ID attributes. 

• More effective penalties for late VAT and Income Tax payments. 

• Modernised dispute resolution processes for quicker outcomes. 

• AI support for importers/exporters via the Online Trade Tariff. 

Our view: This is a significant shift towards a digital‑first HMRC, with an emphasis on automation, compliance, and better customer experience. For VAT‑registered businesses, the changes to MTD, e‑invoicing, and adviser regulation will be key areas to watch. 

VAT Articles 

Flat Rate VAT Scheme Explained – Is It Right for Your Business? 

The Flat Rate VAT Scheme is designed to cut down on paperwork by letting small businesses pay VAT as a fixed percentage of their turnover. It can save time and make returns easier — but it isn’t always the most cost‑effective choice. In our latest guide, we explain exactly how the scheme works, who can use it, the potential savings, and the common pitfalls to watch for. Before you decide whether to join, see how it could impact your bottom line. 

Read the full article here → 

Claiming VAT on Business Entertainment and Staff Expenses – What You Need to Know 

VAT rules around entertaining clients, rewarding staff, and paying travel expenses are a common source of confusion for business owners. Claim too much and you risk an HMRC repayment demand; claim too little and you lose out on legitimate savings. Our latest article breaks down exactly what you can and can’t reclaim — from staff parties to client dinners — and how to avoid costly mistakes. Make sure your expense claims are accurate and compliant. 

Read the full article here → 

Contact Jane Deeks at Deeks VAT Consultancy for professional advice across all industries.  

jane@deeksvat.co.uk | 07710553831 | LinkedIn