Deeks VAT Newsletter issue 54 

Welcome to this month’s Newsletter            

March 2025 issue 54 

Keeping you up to date on VAT changes           

In this month’s newsletter we cover the following: 

VAT Update: HMRC Revises Fuel & Power Guidance 

Sonder Europe Ltd: Sonder seeking approval to appeal UTT decision 

HMRC Late Payment Penalty Case Study: The Jerk Yard Ltd 

Yorkshire Agricultural Society: fund-raising events – UT 

HMRC Launches Educational Campaign for Small Charities 

EU VAT Expert Group 

Stamp Duty Land Tax Relief for Derelict Residential Properties 

VAT Tax Points: Essential Updates 

A VAT Did You know? 

In the UK, children’s car seats are one of the few safety products that qualify for the reduced VAT rate, while adult car safety equipment is standard-rated at 20%. This special treatment helps make essential child safety more affordable for families!

HMRC GUIDANCE UPDATES

VAT Update: HMRC Revises Fuel & Power Guidance  

On 5 February 2025, HMRC updated VAT Notice 701/19, providing crucial clarification on domestic use classification for fuel and power supplies.  

The complex world of VAT on fuel and power can be challenging to navigate. As VAT specialists, we’re here to break down the essential aspects of HMRC Notice 701/19 and what it means for your business. 

VAT Rates: The Basics 

Most fuel and power supplies in the UK are subject to either a reduced rate of 5% VAT or the standard rate of 20%. The key to determining the correct rate lies in understanding how and where the fuel or power is being used. 

When does the 5% Rate Apply? 

The reduced rate of 5% VAT applies to: 

• Domestic use in residential accommodation 

• Charitable non-business activities 

• Supplies below certain quantity thresholds (known as ‘de minimis’ supplies) 

• Qualifying residential and charitable buildings 

Business Use and Standard Rate 

The standard rate of 20% VAT applies to: 

• All business use 

• Non-qualifying premises 

• Supplies exceeding de minimis limits 

Understanding De Minimis Thresholds 

HMRC has established clear quantity thresholds: 

• Electricity: 33 kWh per day or 1,000 kWh per month 

• Gas: 145kWh per day or 4,397 kWh per month 

• Solid fuels: One tonne 

• Oil: 2,300 litres 

Special Considerations 

• Electric Vehicle Charging: Always standard-rated at 20% 

• Mixed-Use Properties: Special rules apply where at least 60% is for qualifying use 

• Customer Declarations: Required for claiming reduced rates in mixed-use scenarios 

Practical Implications 

Understanding these VAT rules is crucial for: 

• Accurate VAT returns 

• Proper invoice preparation 

• Compliance with HMRC requirements 

• Cost management and budgeting 

Sonder Europe Ltd  

Sonder has filed for permission to appeal to the Court of Appeal regarding the Upper Tier Tribunal’s decision on TOMS and material alteration.  
 
Key Appeal Points:  

• Challenging the interpretation of “material alteration”  

• Questions about “direct benefit to consumer”  

• Economic reality considerations  

• UTT’s approach to FTT’s decision-making  

What does this mean for your business?  
 
While this development brings hope, it’s crucial to review your VAT position during this period of uncertainty. Each business needs to evaluate its own risk exposure and mitigation strategies. 

LATEST FROM THE COURTS

HMRC Late Payment Penalty Case Study: The Jerk Yard Ltd February 2025 

Key Facts: 

Case: The Jerk Yard Ltd v HMRC [2025] UKFTT 94 (TC) 

Issue: Appeal against VAT late payment penalty 

Outcome: Appeal dismissed 

The Company’s Arguments: 

• Claimed HMRC delays caused late payment 

• Cited late VAT refund as reason for non-payment 

• Expected refund would cover next VAT liability 

Tribunal’s Key Findings: 

Business should have: 

• Prepared VAT information in advance 

• Not relied solely on expected VAT refund 

• Made contingency plans for payment 

• Considered time-to-pay arrangements 

No Reasonable Excuse Because: 

• Delays in VAT repayments are foreseeable 

• Company had time to make alternative arrangements 

• First-time VAT repayments often require HMRC investigation 

No Special Circumstances: 

• Knowing VAT was due based on submitted return 

• Failure to arrange alternative payment methods 

• Simple non-payment doesn’t justify penalty reduction 

Learning Points: 

• Businesses must plan for VAT payments independently of expected refunds 

• HMRC investigation of first-time repayments is normal 

• Alternative payment arrangements should be considered if cash flow is tight 

• Waiting for refunds is not a reasonable excuse for late payment 

Charity Events, HMRC Initiatives, and EU Developments 

Yorkshire Agricultural Society: fund-raising events – UT 

Landmark Decision for Charitable Events VAT The Upper Tribunal has delivered a significant ruling regarding VAT exemption for charitable fundraising events, using the Great Yorkshire Show as a test case. The Yorkshire Agricultural Society successfully argued that their annual show qualified for VAT exemption, as the event’s fundraising and educational purposes were deemed equally important and interdependent. This ruling provides valuable clarity for charities organising similar events, particularly regarding the interpretation of “primary purpose” in fundraising activities. 

HMRC Launches Educational Campaign for Small Charities 

In a proactive move to support smaller charitable organizations, HMRC has initiated a targeted educational campaign focusing on VAT-registered charities with turnover up to £2 million. In a proactive move to support smaller charitable organisations, HMRC has initiated a targeted educational campaign focusing on VAT-registered charities with turnover up to £2 million. The campaign aims to raise awareness about business/non-business apportionment calculations and their impact on VAT claims. Charities are being contacted directly through educational emails, with HMRC providing guidance on proper VAT apportionment and the potential risk of overclaimed VAT on non-business activities. 

EU VAT Expert Group  

EU VAT Expert Group Charts Future Course Looking ahead to post-ViDA (VAT in the Digital Age) developments, the EU VAT Expert Group has presented its strategic vision for the future of VAT systems. Their December 2024 report emphasises the critical role of an efficient VAT system in maintaining the EU Single Market’s competitiveness. The group has outlined several key foundations for future VAT frameworks, including: 

• Simplified compliance procedures • Enhanced neutrality across EU member states • Improved VAT collection mechanisms • Streamlined refund processes • Creation of an EU VAT agency 

The report acknowledges the immediate priority of implementing the ViDA package while providing a broader strategic roadmap for future VAT frameworks. 

These developments demonstrate the evolving nature of VAT legislation and administration, both domestically and internationally. As always, staying informed and seeking professional guidance ensures compliance while maximising available benefits under current regulations. 

PROPERTY

Stamp Duty Land Tax Relief for Derelict Residential Properties 

Investing in derelict residential properties can be a strategic move, particularly when utilising Stamp Duty Land Tax (SDLT) relief. This relief is crucial for reducing the tax burden on transactions involving properties that require substantial renovation. Here’s a guide on SDLT relief and its application to derelict properties. 

Understanding SDLT Relief for Derelict Properties 

SDLT is generally imposed on the purchase of land and properties in the UK. However, properties classified as uninhabitable may qualify for relief, potentially reducing the financial burden on purchasers. According to SDLT legislation, properties with extensive damage that cannot be easily repaired may not be considered habitable, making them eligible for SDLT relief. 

Eligibility Criteria for SDLT Relief 

To qualify for SDLT relief, a property must be in a state that renders it uninhabitable. This includes conditions such as high levels of asbestos, radioactive pollution, or structural hazards that could lead to a Local Authority issuing a Prohibition Notice. Professional assessments are crucial to substantiate the property’s condition and support your claim for relief. 

Legal Framework and Considerations 

The Finance Act 2003 outlines the legal framework for SDLT relief. Claiming SDLT relief involves completing a SDLT return and entering the appropriate relief code. However, it’s essential to understand these legal requirements to ensure compliance and avoid penalties. 

Apply for the SDLT Relief for Derelict Properties incorrectly, could result in penalties and interest charges.  

Case Study: P N Bewley Ltd v HMRC 

A notable case, P N Bewley Ltd v HMRC, highlighted the complexities of SDLT relief. The Tribunal ruled in favour of the purchasers, acknowledging that the derelict condition of the property, including issues like asbestos and lack of basic amenities, rendered it uninhabitable, thus exempting it from the 3% SDLT surcharge. 

Understanding the full scope of SDLT relief for derelict properties can provide significant financial advantages. By effectively navigating the legal landscape, investors can maximise savings. 

VAT

VAT Tax Points: Essential Updates 

Understanding when VAT becomes due (the tax point) is crucial for correct VAT accounting. While seemingly straightforward, tax point determination can be complex and getting it wrong can be costly. 

Key Points to Remember:  

• Basic tax point for goods: When goods are removed or made available  

• Basic tax point for services: When services are performed  

• Earlier tax points can be created by invoicing or payment  

• The 14-day rule can override basic tax points  

• Special rules apply for continuous supplies and deposits 

Strategic tax point planning can benefit cash flow and help avoid penalties.  

Read the full article here:  TAX Points. What you need to know

For detailed guidance on VAT tax points and their impact on your business, contact our team. 

 For any VAT or TAX Enquiries contact:   

Jane Deeks, Managing Director   

 jane@deeksvat.co.uk   

 07710553831