Deeks VAT News Issue 67: The Latest to Keep You (and Your Clients) Compliant and Clever

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Welcome to this Issue of Deeks VAT Newsletter    

September 2025 issue 67

Keeping you up to date on VAT changes        

In this month’s newsletter we cover the following: 

Court of Justice of the European Union (CJEU) rules a taxable supply 

Supreme Court Appeal Update: Prudential Assurance Company Ltd v HMRC 

Update: VAT Notice 700/45: Correcting Errors and Making Claims 

Update: Excise Notice 85c: Anti Forestalling Restrictions on Tobacco Products 

Exporting Goods from the UK: VAT Zero Rating and the Ripley Case 

VAT Treatment of Meal Deals in the UK — What Businesses and Consumers Need to Know 

Latest from the Courts 

Court of Justice of the European Union (CJEU) rules a taxable supply 

Case Law Update: VAT and Transfer Pricing – Court of Justice of the European Union (CJEU) rules a taxable supply 

Case Summary: SC Arcomet Towercranes SRL v Direcţia Generală Regională a Finanţelor Publice Bucureşti & Administraţia Fiscală pentru Contribuabili Mijlocii Bucureşti 

This case relates to intra-group services and VAT, where the CJEU ruled on Transfer Pricing, Deductibility & Documentation. As this is a CJEU case it is not binding only persuasive. It is likely that HMRC may follow this ruling in the UK.  

Key Points: 

1. VAT Applies to Intra-Group Services Based on Transfer Pricing 

• The Court held that a settlement payment made by a subsidiary (Arcomet Romania) to its parent company (Arcomet Belgium), calculated using the OECD’s transactional net margin method, constituted consideration for a taxable supply of services. 

• Even though the price was based on operating margin adjustments (above 2.74%), there was a direct link between the services provided and the payment made, satisfying VAT’s “supply for consideration” requirement under Article 2(1)(c) of the VAT Directive. 

2. Right to Deduct VAT Requires Evidence Beyond Invoices (When Justified) 

• The Court confirmed that tax authorities may request additional documentation beyond an invoice (e.g., activity reports or service breakdowns), provided such requests are necessary and proportionate. 

• This supports Articles 168 and 178 of the VAT Directive, allowing deduction of VAT only when actual services were supplied and used for taxable business activities. 

• However, tax authorities cannot demand proof of the economic profitability or necessity of the services, only proof that the services were genuinely provided and used. 

Practical Implications for VAT Professionals: 

• Intra-group cost-sharing and transfer pricing arrangements can trigger VAT where services are clearly defined and have a corresponding payment. 

• Invoices alone may not be sufficient for input VAT recovery if they lack detail; firms should maintain clear documentation showing service delivery and business use. 

• Tax planning and documentation should align with both VAT and transfer pricing principles to withstand scrutiny. 

Supreme Court Appeal Update – Prudential Assurance Company Ltd v HMRC 

The Supreme Court handed down its judgment in Prudential Assurance Company Ltd v HMRC on 11 September 2025. This case has significant implications for the VAT treatment of intra group supplies and the operation of VAT grouping rules. 

Background 

The dispute concerns investment management services provided by Silverfleet Capital Ltd (SCL) to Prudential Assurance Company Ltd (Prudential). At the time the services were performed, both entities were members of the same VAT group, meaning that supplies between them should ordinarily have been disregarded for VAT purposes. 

However, complications arose because some of the payments relating to those services were invoiced and paid after SCL had ceased to be a member of the VAT group. HMRC took the view that VAT was chargeable on those payments, arguing that regulation 90 of the VAT Regulations treats continuous supplies of services as taking place at the time the invoice is issued or payment is made. 

Court of Appeal ruling 

The Court of Appeal upheld HMRC’s position, holding that VAT was due. The Court emphasised that the VAT grouping disregard did not apply once SCL had left the group. Even though the services were carried out during group membership, the timing rules in regulation 90 meant that the relevant supply was deemed to occur when invoiced and paid by which point SCL and Prudential were no longer in the same VAT group. 

Significance of the appeal 

The appeal to the Supreme Court is crucial because it tests the interaction between VAT grouping rules and the timing provisions for continuous supplies of services.  

Supreme Court Ruling 

The Supreme Court ruled in favour of HMRC and upheld the Court of Appeal’s ruling.  

This means businesses face VAT charges on intra group services simply because invoicing or payment takes place after a group reorganisation, sale, or exit. 

This creates potential risks for large corporate and financial institutions where intra group service arrangements are common. It also raises wider questions about the certainty of VAT group protection when corporate structures change. 

The judgment not only impacts the financial services sector but also by any business that relies on VAT grouping to simplify internal charging and avoid irrecoverable VAT costs. 

HMRC Updates 

Update: VAT Notice 700/45: Correcting Errors and Making Claims 

HMRC has published an update to VAT Notice 700/45, which sets out the rules for identifying and correcting errors on VAT Returns and for claiming refunds of VAT that has been wrongly accounted for. This Notice is particularly important because businesses remain legally responsible for ensuring their VAT returns are accurate, and penalties can apply if errors are not dealt with correctly. 

Key updates in the latest version 

Section 4: Correction of VAT errors 
Provides clearer guidance on how and when to correct errors, including when adjustments can be made through the current VAT Return and when a formal error correction notice must be submitted. HMRC also explains what action it may take if businesses fail to correct errors promptly. 

Section 6: Input tax claims 
Updated to confirm the circumstances in which businesses can claim input tax and what documentation HMRC may require to support claims. This is particularly relevant where input tax was omitted on earlier returns. 

Section 7: Underpayments and overpayments 
Expanded detail on how HMRC handles adjustments for underpaid or overpaid VAT, including timeframes for repayment once an error correction has been submitted. This aims to give businesses more clarity on when they can expect a response and how to manage cash flow. 

Section 9: Unjust enrichment and reimbursement scheme 
Clarifies HMRC’s position on unjust enrichment (where a business would benefit unfairly from a refund). The section also explains how the reimbursement scheme operates and confirms HMRC’s approach to repaying statutory interest on VAT overpayments. 

Why this matters for businesses 

Errors under £10,000 can often be corrected on the next VAT Return, but larger errors require a formal error correction form or written letter to HMRC. 

Failure to correct errors can lead to penalties for inaccuracies under Schedule 24 Finance Act 2007, even if the mistake was not deliberate. 

HMRC’s clarification on unjust enrichment means businesses making retrospective claims should ensure they can demonstrate that refunds will be passed on where appropriate (for example, to customers). 

The updated sections align more closely with HMRC’s penalty reform and its focus on compliance, meaning that accurate record keeping and timely corrections are now more critical than ever. 

Update: Excise Notice 85c: Anti Forestalling Restrictions on Tobacco Products 

HMRC has issued an update to Excise Notice 85c, which sets out the anti forestalling restrictions on tobacco products. These rules are designed to prevent businesses from removing unusually high volumes of tobacco products for home use immediately before a duty rate rise, a practice known as forestalling. 

Key changes in this update 

• Date of assumed duty rate rise: Changed from 19 November 2025 to 26 November 2025 

• Length of restricted period: Amended from 80 days to 87 days, running from 1 September 2025 up to the new assumed rate rise date 

• Deadline for opening statements: Changed from 8 September 2025 to 15 September 2025 

Why this matters 

The anti forestalling provisions require manufacturers and importers of tobacco products to submit opening stock statements and comply with restrictions on removals for home use during the defined period before a duty increase. 

These updates mean that: 

• Businesses must align their planning and reporting to the new timetable 

• Stock removal strategies need to reflect the 87 day restricted window 

• Failure to meet the updated deadline for opening statements could result in non compliance, penalties, or HMRC challenge 

Practical considerations 

• Check internal compliance calendars and update deadlines immediately 

• Review stock forecasts to ensure removals for home use remain within permitted levels 

• Ensure your excise accounting systems reflect the new restricted period and amended reporting date 

VAT Articles 

Exporting Goods from the UK: The Ripley Case 

A recent Tribunal decision in H Ripley & Co Ltd v HMRC shows how fragile VAT zero rating can be. 

Although goods were exported to Belgium, HMRC denied zero rating because the company’s evidence was incomplete: unsigned CMRs, ferry bookings that could not be matched, and paperwork submitted too late. 

The ruling reinforces that exporters must meet three conditions: goods must leave the UK, do so within three months, and the exporter must hold sufficient, timely evidence of removal. 

📌 Read our full article on the website for key lessons from the Ripley case and practical tips to protect your exports from VAT challenges. https://deeksvat.co.uk/exporting-goods-from-the-uk-vat-zero-rating-and-the-ripley-case/ 

VAT & Meal Deals: What You Need to Know 

The VAT applied to meal deals (main + snack + drink) depends heavily on how the deal is structured. If components are sold separately, or if a dominant item can be identified, different VAT rates will apply across the bundle. HMRC guidance (VFOOD5200; GfC2) expects businesses to use fair methods (often based on individual selling prices) to apportion the price among components. 

🍽️ Read the full article on our website to explore how Tesco handles it, what record keeping is essential, and how consumers or VAT-registered businesses might optimise their choices. https://deeksvat.co.uk/vat-treatment-of-meal-deals-in-the-uk-what-businesses-and-consumers-need-to-know/ 

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

jane@deeksvat.co.uk | 07710553831 | LinkedIn