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Deeks VAT Newsletter issue 57

Welcome to this Issue of Deeks VAT Newsletter   

April 2025 issue 57

Keeping you up to date on VAT changes    

In this month’s newsletter we cover the following:

Court of Appeal – Insurance intermediary did not make a separate taxable supply of goods to policyholders

HMRC Updates April 2025

Changes To Vat Rules For Virtual Events In The EU

VAT Registration Requirements for Non-EU Marketplace Sellers

Latest from the Courts

Court Rules on VAT Treatment of Telematics Insurance Devices

Case Summary: WTGIL Limited (Ingenie) v HMRC

Court: Court of Appeal (CoA)

Background:

• ISL (part of Ingenie VAT group) operated as an insurance intermediary
• Specialised in telematics car insurance for young drivers (17-25)
• Required installation of tracking devices (“black boxes”) in customers’ vehicles
• Devices monitored driving behaviour to adjust premiums

The Dispute:

• Ingenie claimed £2.08M VAT refund for device costs (2014-2018)
• Claimed the devices were separate taxable supplies to policyholders
• HMRC rejected: viewed devices as part of exempt insurance services

Key Arguments:

Ingenie’s Position:

• Device provision was a separate taxable supply
• Either paid through non-monetary consideration or commission
• Alternatively, deemed supply under VAT law

HMRC’s Position:

• No separate contract for device supply
• All services part of exempt insurance intermediary service
• Commission from insurers was sole consideration

Court’s Decision:

The Court of Appeal ruled in HMRC’s favour, finding:

1. Device provision was integral to insurance service
2. Services fell within VAT exemption for insurance-related services
3. Artificial to separate device supply from overall insurance service

Impact:

• Businesses providing goods as part of exempt services should review their VAT treatment
• Emphasises importance of considering overall commercial reality
• Reinforces principle of examining complete relationship between parties

Key Takeaway:

When goods are essential to delivering an exempt service, they may form part of that exempt supply rather than qualifying as separate taxable supplies.

HMRC Updates: April 2025

Customs Declaration Service (CDS) Import Declarations

 New guidance on amending or cancelling declarations

Timing depends on:

• Receipt of final tax calculation
• Declaration clearance status

New post-clearance section added

Contact: Gerard Koevoets (Global Trade enquiries)

UK Customs Population Statistics 2024

New publication detailing UK importing/exporting businesses

Covers both EU and non-EU trade

Related resources:

• UK Importer/Exporter Population data tables 2024
• General Customs Population information

 Contact: Gerard Koevoets (Global Trade enquiries)

Marine Voyages Fuel Duty Relief (Notice 263)

Updated guidance on vessel eligibility

Section 2.1 enhanced to clarify:

• Eligible vessel definitions
• Qualification criteria for relief

Contact: Craig Clark (Excise Duty enquiries)

VAT Notice 733: Flat Rate Scheme

Key updates:

Section 2.4 clarification:

• No input tax or VAT recovery under scheme
• Northern Ireland businesses: Cannot recover VAT on EU acquisitions
• Includes application process and eligibility criteria

VAT Group Administration

New guidance available for:

a) Agent Authorisation (Form VAT53)

• Process for accountants/agents
• Registration and amendment permissions

b) VAT Group Changes (Form VAT50/51)

• Amendment procedures
• Member removal process

Changes To The VAT Rules For Virtual Events

As of 1 January 2025, the European Union revised its VAT place of supply rules for virtual events provided to private consumers. Under these changes, VAT is now charged based on the location where the service is used—specifically, the country where the customer resides—rather than where the supplier is established.

This update aligns virtual events with the existing VAT treatment of electronically supplied services (ESS) in both the EU and the UK, requiring businesses to charge VAT in the consumer’s country of residence.

Implications for Suppliers

This adjustment presents practical challenges for suppliers, including determining the customer’s location and obtaining sufficient evidence to justify the VAT treatment. Within the EU, businesses can manage their VAT obligations through the Union One Stop Shop (OSS) scheme, streamlining compliance.

UK based and other non-EU businesses, meanwhile, have access to the Non-Union OSS mechanism, enabling them to register for VAT in just one EU country rather than multiple jurisdictions.

For UK suppliers of virtual events, this means VAT must now be accounted for in the EU country where their customers are based. However, they must also consider how these changes interact with the existing UK VAT system.

Conflicting VAT Rules Between the UK and EU

Unlike the EU, the UK has not amended its VAT regulations and continues to apply VAT based on the supplier’s location. This misalignment results in potential double taxation for UK businesses.

For example, a UK business supplying virtual events to private consumers in France must charge UK VAT under domestic rules while also accounting for French VAT under the EU’s updated framework.

This overlapping tax burden increases costs and administrative requirements, potentially affecting profitability.

Conversely, EU suppliers providing virtual events to UK customers face no VAT obligations in either jurisdiction. The EU’s approach assigns VAT liability based on the customer’s location, whereas the UK mandates VAT be accounted for based on the supplier’s establishment. This discrepancy could create a competitive disadvantage for UK-based businesses.

Next Steps for Affected Businesses

Before Brexit, UK VAT rules would have automatically aligned with EU regulations. However, it remains unclear whether the UK’s failure to adopt these changes is an intentional policy decision. The UK government has not yet provided clarification on its stance.

If the UK were to amend its rules, it could both eliminate the issue of double taxation for UK suppliers and ensure VAT is collected from non-UK businesses selling virtual events to UK consumers.

This would require proper enforcement, including identifying and registering foreign suppliers that fail to comply with UK VAT obligations.

There is already precedent for such action, as HMRC has targeted non-UK suppliers of electronically supplied services (ESS) that have not registered for UK VAT.

Should similar changes occur, non-UK providers of virtual events may be required to register for UK VAT from their first sale, as there is no minimum registration threshold.

To navigate these changes, businesses should carefully review their customer base and supply chains to assess their VAT obligations.

Addressing potential double taxation and ensuring compliance with both UK and EU regulations will be essential to avoid unexpected tax liabilities.

VAT Registration Requirements for Non-EU Marketplace Seller: Understanding the Deemed Supplier Model

Introduction

While the EU’s 2021 e-commerce VAT rules made online marketplaces responsible for VAT on certain B2C sales, non-EU sellers still need VAT registration. Here’s why.

The Deemed Supplier Structure

Under Article 14a of the EU VAT Directive, a single B2C transaction is split into two for VAT purposes:

1. A B2B supply from seller to marketplace (zero-rated)
2. A B2C supply from marketplace to customer (VAT applicable)

When Does This Apply?

The marketplace becomes the deemed supplier for:

• Low-value imports (up to €150)
• EU domestic sales from non-EU sellers
• Intra-EU distance sales from non-EU sellers

Why Registration Remains Necessary

Despite marketplaces handling B2C VAT, non-EU sellers must register when:

1. Storing goods in EU warehouses
2. Making deemed B2B supplies to marketplaces
3. Requiring input VAT recovery

Key Registration Triggers

• Location of goods determines VAT obligations
• Zero-rated B2B supplies still require reporting
• Standard invoicing requirements apply
• Input VAT recovery needs local registration

Additional Considerations

Other activities requiring VAT registration include:

• Stock transfers between EU warehouses
• Export sales from EU inventory
• Intra-Community acquisitions

Benefits of Registration

• Input VAT recovery on local expenses
• Compliance with EU VAT regulations
• Proper transaction documentation

We hope you found this newsletter informative. For any VAT Enquiries contact:   

Jane Deeks, Managing Director   

 jane@deeksvat.co.uk   

 07710553831