DEEKS VAT NEWS – ISSUE 71

Helping you stay ahead of the VAT curve.

Welcome to this Month’s Newsletter

Another fortnight, another rich batch of VAT developments, including tribunals untangling the endless principal vs agent debate, further clarity on property-related charges, and HMRC pressing ahead with cross-border compliance changes that will quietly tighten the screws on unsuspecting businesses.

Property specialists will be particularly interested in the Places for People decision, which reinforces that maintenance charges do not magically become VAT-exempt simply because they sit alongside housing leases. Meanwhile, the Express Brands case gives fresh ammunition for HMRC on agency structures where commercial reality doesn’t match the paperwork, an area we continue to see queried heavily on VAT reviews.

On the policy front, the Finance (No. 2) Bill dropped with limited fanfare but several important VAT measures, notably charity donation relief and further tweaks to the Tour Operators’ Margin Scheme for private hire and taxi providers. HMRC have also published up-to-date Business Briefs covering the Skandia grouping rules and change in deductibility rules for insurance intermediaries, both matters that remain easily overlooked and potentially costly.

Our main technical article this fortnight focuses on Postponed VAT Accounting (PVA), one of the simplest cashflow advantages available to importers when properly managed, but also an area where we encounter persistent compliance errors.

• Case Law Updates
  • Places for People Homes Ltd
  • Express Brands Ltd
  • Dreyer
  • Hall
• Finance Bill VAT Measures – 2025
• HMRC Business Briefs & Updated VAT Guidance
• This Week’s VAT Article – Using Postponed VAT Accounting

CASE LAW UPDATES

Places for People Homes Ltd – Maintenance services and VAT liability

The FTT considered whether maintenance services relating to blocks of flats were supplied to lessors or lessees and whether those services formed part of a single exempt supply of land.

The Tribunal found that the services were supplied to the lessors rather than to tenants. They were not part of a composite supply of land, nor ancillary to it. Accordingly, the maintenance services remained a separate standard-rated supply for VAT purposes.

The appeal has been stayed pending the Upper Tribunal outcome in the Chelsea Cloisters litigation concerning EU law principles of legitimate expectation and legal certainty.

Judgment:
https://www.bailii.org/cgi-bin/format.cgi?doc=/uk/cases/UKFTT/TC/2025/TC09695.html

Express Brands Ltd – Principal or agent analysis

This case examined whether the taxpayer acted as a principal or agent in retail sales. The tribunal confirmed that VAT liability follows the commercial substance rather than contractual labels.

Because the company controlled pricing, bore commercial risk and dealt directly with customers, it was treated as the principal supplier and liable to VAT on the full sales value.

Judgment:
https://www.bailii.org/cgi-bin/format.cgi?doc=/uk/cases/UKFTT/TC/2025/TC09689.html

Dreyer – Input tax recovery and attribution

This case concerned the recovery of input VAT and the requirement to demonstrate a clear connection between expenditure and taxable outputs.

The Tribunal upheld HMRC’s restrictive approach, confirming that general intention alone is insufficient to support input tax recovery and documentary evidence of attribution is essential.

Judgment:
https://www.bailii.org/cgi-bin/format.cgi?doc=/uk/cases/UKFTT/TC/2025/TC09684.html

Hall – Single or multiple supplies

Hall examined whether supplies bundled together should be treated as a single composite supply or as multiple distinct supplies.

Applying established case law, the Tribunal held that where elements have independent economic purposes from the customer’s perspective, they remain separate supplies carrying their own VAT treatment.

Judgment:
https://www.bailii.org/cgi-bin/format.cgi?doc=/uk/cases/UKFTT/TC/2025/TC09703.html

FINANCE (NO. 2) BILL 2024–26 – VAT MEASURES

The Finance Bill published on 4 December 2025 introduced various VAT amendments, including changes affecting the Motability Scheme, revised TOMS treatment for private hire and taxi operators, and new relief for certain business donations to charities.

The Bill also establishes Vaping Products Duty and the Carbon Border Adjustment Mechanism, marking a continued move toward expanding environmental taxation frameworks.

HMRC BUSINESS BRIEFS & GUIDANCE UPDATES

Budget 2025 – VAT relief on donations of eligible goods to charities

https://www.gov.uk/government/publications/removing-vat-on-donations-of-eligible-goods-from-businesses-to-charities/vat-relief-for-business-donations-on-goods-to-charities

This guidance confirms the conditions under which businesses may donate qualifying goods to UK charities free of VAT. The relief remains documentation-heavy and requires careful transaction evidencing.

Revenue & Customs Brief 7 (2025) – VAT grouping and the Skandia judgment

https://www.gov.uk/government/publications/revenue-and-customs-brief-7-2025-revised-vat-grouping-rules-and-the-skandia-judgment

This Brief updates HMRC’s policy on charges between overseas head offices and UK branches that belong to a VAT group. Such recharges may now trigger VAT under Skandia principles, presenting risk for multinational structures.

Revenue & Customs Brief 8 (2025) – TOMS and PHV/taxi services

https://www.gov.uk/government/publications/revenue-and-customs-brief-8-2025-vat-tour-operators-margin-scheme-supplies-by-private-hire-vehicle-or-taxi-operators?utm_medium=email&utm_campaign=govuk-notifications-topic&utm_source=0144468d-874f-426a-9138-72a248a7f1bb&utm_content=daily

This guidance clarifies the application of the Tour Operators’ Margin Scheme to ride-hailing and taxi facilitation models where subcontracting is used.

THIS WEEK’S VAT ARTICLE – Using Postponed VAT Accounting (PVA)

Postponed VAT Accounting allows VAT-registered businesses to declare import VAT on their VAT return rather than paying it upfront at the border. Output VAT is declared in Box 1 and reclaimed in Box 4 (subject to recovery rules), eliminating unnecessary cashflow delays.

To operate PVA, the business must select this option on the customs declaration. HMRC then issues a Monthly Postponed VAT Statement through the Government Gateway. This statement is the formal evidence required to support VAT declarations and recoveries and must be downloaded and retained. Without it, recovery is exposed to challenge.

The VAT return must reflect the figures from the statement in the correct period:

• Box 1 – Import VAT due
• Box 4 – Import VAT recoverable
• Box 7 – Net value of imported goods

A common compliance failure arises where VAT returns are submitted before PVA statements become available, leading to under-declaration or omission.

PVA is particularly beneficial for businesses importing high-value or high-volume supplies. However, special care is required where VAT recovery is restricted or partial exemption applies, as import VAT may not be fully deductible.

Recurring errors we encounter include:

• Failure to download the statements
• Incorrect VAT return box entries
• Period mismatches
• Partial exemption miscalculations

HMRC has consolidated operational guidance into a single collection which can be accessed here:
https://www.gov.uk/government/collections/using-postponed-vat-accounting

EXPLORING WAYS TO WORK TOGETHER

Whether you need technical VAT support, case-specific compliance advice, or structured assistance for your accounting firm via the Accountants VAT Club, we are always happy to discuss how we can support your VAT offering and reduce professional risk.

If you would like to discuss any of the issues raised in this newsletter, please feel free to contact me, Jane Deeks, on 07710 553831 or by email at jane@deeksvat.co.uk