26 November 2025
Helping you stay ahead of the VAT curve.

Welcome to this Month’s Newsletter

Well, here we are again, another fortnight, another avalanche of VAT developments, judicial plot twists, and HMRC updates that would make even the most seasoned practitioner reach for an unreasonably large mug of tea (or something stronger, depending on your CPD backlog).

This week’s biggest headline? The unfolding saga of Sonder Europe, once the shining disruptor of serviced accommodation, now increasingly resembling a cross between an EU law exam question and a Netflix courtroom drama. With the UTT’s famously “opaque” reasoning and Sonder US now filing for Chapter 11, the whole industry is anxiously awaiting whether the Court of Appeal will ever get its hands on this case, or whether the wheels will fall off before February 2026.

Elsewhere in the courts, we’ve got nurse staffing disputes, carpet-fitting confusion, late-appeal wrangling, a Kittel decision that breaks the trend (in favour of the taxpayer!), and a food classification case that reminds us all, yet again, that VAT is far too spicy to leave to logic.

And HMRC has been busy too, with policy clarifications, updated notices, and a new Brief for insurers and intermediaries.

Finally, this week’s article tackles a topic that has caused more client confusion than any other since Brexit: selling goods into the EU.

In this Month’s Newsletter We Cover:

• Case Law Updates
• Sonder Europe Ltd — TOMS
• 1st Alternative Medical Staffing Ltd
• United Carpets (Franchisor) Ltd
• Lands Luo Ltd
• SK Metals Ltd
• Telamara Ltd
• Ferrero UK Ltd
• HMRC Notices & Guidance
• This Week’s VAT Article: Selling in the EU – Issues to Consider
• Exploring Ways to Work Together

CASE LAW UPDATES

Sonder Europe Ltd – The Future of the Case (TOMS)

The Court of Appeal hearing for Sonder Europe Ltd is scheduled for February 2026, but new developments may impact the case. Sonder US has filed for Chapter 11, and liquidators have not yet assessed whether to continue funding the UK appeal.

The underlying VAT issue concerns whether serviced accommodation operators who acquire leases of 2–10 years and resell short-term licences can use the Tour Operators’ Margin Scheme (TOMS). The UTT held they could not, due to material alteration / lack of direct benefit.

The industry is anxiously awaiting clarity, and fears grow that the appeal may be dropped.

Commentary:
If the case collapses, the vague UTT decision remains, leaving operators exposed and uncertain. A collaborative approach to HMRC may now be necessary.

1st Alternative Medical Staffing Ltd (FAMS)

FAMS supplied nursing and care staff to hospitals and care homes. It treated itself as an agent, accounting for VAT only on its commission. HMRC disagreed and assessed VAT on the full value.

The FTT held:

• FAMS was not a state-regulated institution.
• Its supplies were not closely related to medical care.
• The exemption did not apply.
• Appeal dismissed.

Commentary:
A timely reminder that agency vs principal disputes remain a major HMRC focus. Historic HMRC letters are not a safe defence.

United Carpets (Franchisor) Ltd v HMRC [2025]

A straightforward conclusion after HMRC argued that a “free fitting” promotion implied a single supply of goods plus fitting.

The FTT found:

• Fitters were independent.
• Customers could choose any fitter.
• Contracts reflected commercial reality.
• United Carpets supplied goods only.

Commentary:
Marketing language matters, but substance wins. Thankfully, common sense also made an appearance.

Lands Luo Ltd – Late Appeal

A rare three-member tribunal considered whether a late appeal should be allowed.

The FTT:

• Applied the stricter Martland approach.
• Granted permission to appeal out of time.
• Confirmed the same result under Medpro.

Commentary:
The divergence between Martland and Medpro continues, and a higher-court resolution may be on the horizon.

SK Metals Ltd – Kittel, Penalties and PLN

A positive outcome for the taxpayer.

The FTT held:

• SK Metals did not know, nor ought it to have known, of any VAT fraud.
• Suspicious factors had plausible explanations.
• Input tax denial was incorrect.
• Penalty and PLN fell away.

Commentary:
Imperfect due diligence does not equal wilful blindness. A very helpful judgment for MTIC-related disputes.

Telamara Ltd – Nitrous Oxide as “Food”

Telamara sold N₂O canisters (“cream chargers”) as zero-rated. HMRC disagreed.

The FTT held:

• N₂O is a propellant, not an ingredient.
• It leaves no residue in the food.
• It is not “food” for zero-rating.
• Appeal dismissed.

Commentary:
Yet another reminder that VAT and food classification is a chaotic and illogical pairing.

Ferrero UK Ltd – Nutella Biscuit

The FTT held that Nutella Biscuits were not “partly covered” in a chocolate-like product — unlike Blissfuls.

Commentary:
One day, food zero-rating will make sense. Today is not that day.

HMRC NOTICES & GUIDANCE

Input Tax Deductibility: Insurance Intermediaries

HMRC has issued a Brief confirming a policy change on input tax deductibility for insurance intermediary services supplied outside the UK before 31 December 2023.

Jane’s View:
Businesses with historic adjustments should review their position urgently — this affects entitlement and review outcomes.

VAT Notice 700/56 – Insolvency

Key updates:

• Updated HMRC payment details (Section 8).
• Streamlined credit-note guidance (Section 12).

Key Takeaway:
Small changes, but impactful for insolvency compliance workflows.

VAT Notice 701/6 – Charity-Funded Medical Equipment

Updates include:

• Revised definition of medical equipment.
• New rules for training models.

Jane’s View:
Useful clarity for charities investing in medical tech and specialist models.

THIS WEEK’S VAT ARTICLE

Selling in the EU: Issues to Consider — Rewritten, Original Version

Expanding into EU markets can feel like opening a door into a corridor of even more doors, each labelled with a different VAT regime, import rule, or three-letter acronym designed to confuse even the most diligent business owner. Since Brexit, the questions coming from clients tend to fall into familiar themes: Do I need to register for VAT in Europe? What is the IOSS? Will OSS apply to me? And why does every country seem to have a different VAT rate?

This guide breaks down the main issues to consider when a UK business starts selling goods (not services) to customers in the EU. The rules are more complicated than for services because every sale involves two separate VAT systems: UK export rules, and the import/VAT rules of the EU country where the goods arrive.

1. Exporting Goods from the UK – Getting Zero-Rating Right

When goods physically leave Great Britain, the supply is usually zero-rated, but the zero rating isn’t automatic. Your client must be able to prove the goods were exported.

That means:

• They must hold a valid EORI number.
• They need commercial documentation describing the goods clearly.
• Transport documents (e.g. bills of lading, airway bills, courier tracking) must show the goods leaving the UK.
• These records must be kept for six years.

Most importantly, exporters get three months to collect the evidence. If they fail to gather the right proof in time, they must treat the sale as standard-rated.

Practical point:
Encourage clients to treat export evidence like CIS paperwork or AML records, something to be monitored proactively, never retrospectively.

2. Who Is the Importer of Record? (The Question That Decides Everything

Once the goods hit the EU border, the crucial issue is: who is responsible for the import?

If the EU customer is the importer of record:

• Your client does not need to register for VAT in that country.
• The customer pays any import VAT, duty or customs fees.
• After the UK export, your client’s involvement ends.

This is usually the simplest and cleanest option.

If your client is the importer of record:

• They will normally need to obtain a local VAT registration.
• They pay import VAT (recoverable via the local VAT system).
• They must charge local VAT on their onward sale.
• They file local VAT returns and comply with that country’s rules.
• No “registration threshold” applies to non-EU businesses.

Professional tip:
Unless there is a strong commercial reason to take on the import VAT, most UK businesses should avoid becoming the importer.

3. Special Case: Northern Ireland

If your client is based in Northern Ireland, the situation changes because NI remains inside the EU VAT rules for goods.

This means:

• EU acquisitions and dispatches rules still apply
• NI businesses may need to complete EC Sales Lists
• OSS may be relevant depending on the arrangement

Always check NI-specific guidance before advising.

4. OSS vs IOSS – Untangling the Acronyms

Brexit brought a lot of VAT upheaval, but the introduction of the EU’s one-stop shop schemes caused even more widespread confusion.

IOSS – Import One Stop Shop

IOSS is relevant where:

• Goods are sold B2C
• They are shipped directly into the EU
• The value of each consignment is under €150/£135

Under IOSS:

• Your client charges VAT at the EU rate at checkout, not at import.
• There is no import VAT for low-value consignments.
• Only one monthly IOSS return is required, covering all EU countries.
• It avoids multiple VAT registrations.

It is often the most efficient approach for low-value online orders.

OSS – One Stop Shop

OSS applies mainly to cross-border EU services and certain movements of goods within the EU between EU establishments.
For UK goods exporters, OSS is generally irrelevant.

5. Pricing and Profit Margins – The Hidden Risk

Clients often forget that each EU country sets its own VAT rates, and they vary widely. If they advertise VAT-inclusive prices, their margins will differ from country to country.

For example:

• Sweden’s standard rate: 25%
• Belgium: 21%
• Ireland: 23%
• Luxembourg: 17%

A uniform retail price means an uneven profit margin once EU VAT is deducted.

Adviser tip:
Encourage clients to build a pricing strategy that accounts for these differences, especially if using the IOSS.

6. Online Marketplace Sales (Amazon, eBay, Etsy)

If goods are sold via an online platform and the consignment value is below €150:

• The platform becomes responsible for charging and paying the VAT.
• Your client makes a zero-rated supply to the platform.
• Your client does not need an EU VAT registration for that sale.

However, a key exception applies:

If your client stores goods in an EU warehouse

(e.g. Amazon FBA in Poland, Czech Republic, Germany)

They must register for VAT in the storage country, irrespective of value or B2B/B2C status.

7. The Core Principles to Tell Your Clients

When a UK business starts selling goods to the EU, the main points to communicate are:

• Zero-rating requires proof, keep documentation tight.
• The importer of record determines whether an EU VAT registration is needed.
• IOSS is usually the best option for sub-€150 B2C online sales.
• Price lists may need adjusting because EU VAT rates vary.
• Storing goods in the EU creates an immediate VAT registration obligation.
• NI-based businesses face different rules.
• OSS and IOSS are not interchangeable.

Final Thought

Selling into the EU is entirely manageable with the right structure in place. The biggest pitfalls occur when businesses assume that EU VAT operates like UK VAT, or that “someone else” will naturally deal with import taxes. A clear upfront conversation about evidence, importer status, VAT rates, and the advantages of IOSS can keep clients compliant, and save you a great deal of firefighting later.