News & Articles


Monthly VAT update: May 2023


Our monthly round-up of the latest VAT news.

AirBnB and VAT

In a move very similar to the Online Market Place scenario (many sellers not accounting for VAT, holding the platform operators to account rather than chasing down the individual suppliers, etc.) the EU has announced that from 1 January 2025 platform owners for holiday accommodation (i.e. Air BnB) will have to account for the relevant VAT when properties in EU member states are rented out.

As an EU announcement this would only affect GB individuals who own property in the EU. But as a revenue raising measure the “blame” for which can be laid at the EU’s door, is it one that Mr Hunt will ignore?

Pharmacist supervised supplies

The Spring Budget did have a few VAT measures one of which includes the extension of the exemption to include medical services provided by a non-Healthcare Professional directly supervised by a qualified pharmacist. In making the announcement it was said to “reflect the way in which the NHS currently operates”. No doubt a cynic would say “if you can’t get to talk to your GP or get into a hospital go see the chemist”. 

Guilty pleasure

If you can see past the shouty puns of Greg Wallace, “Inside the Factory” can provide a diverting hour about how daily goods are made (a favourite of mine is the mattress - from wire drawing for the springs onwards).

A recent addition was the Jaffa Cake which of course included the infamous trial about the VAT liability featuring non other than Dario Garcia who appeared in the original case for the appellant. No doubt Dario oversaw the script for this section as there was no confusing zero rate for exempt etc. But it does highlight the fact that whilst most of VAT is logical it does not necessarily appear to apply to food.

Shots not a drink

To demonstrate the way food and VAT may go against reason; a business sold Turmeric Shot bottles. Small bottles containing turmeric root crushed with fruit juices. The aim of the product was to be a daily health product due to the claims health benefits of turmeric. The zero-rate group for foods zero-rates all food products suitable for human consumption, except for supplies of catering and excepted items. Such exceptions include fruit juices, bottled water, and other products falling under ‘preparation of beverages’.

The argument was that although liquid in form, the purpose of the product was not to restore or increase levels of hydration in the body but that it was a more accessible and palatable way of getting the turmeric into the body.

This was accepted by the Tribunal so the product was zero-rated and not a standard rated beverage.

Online VAT Registration

If you are trying to make an online VAT registration application and you get a page saying “Sorry, there appears to be a temporary problem. Please try again later.” This may not be the case and it could be that the issue is that the online system is not as flexible as the previous portal in accepting details of certain business and that problem is not temporary but rather permanent. If this is the case, then the only viable alternative is to make a postal application. 

DIY housebuilding – mortifying for HMRC?

The DIY housebuilder’s scheme has seen a couple of important decisions over the last few years. This is another which may have implications for HMRC beyond the scheme itself.

The aim of the scheme is to put a DIY housebuilder on a similar (not the same) VAT footing as a VAT registered developer. When buying in standard rated building materials (a definition that has proved a moveable fest over the years) the DIY scheme allows the buyer to claim the VAT from HMRC. Many are the calls I’ve had asking if building materials should be at the zero-rate. My response conflates a scene where there’s a scheme the allows for building materials to be sold, at the zero-rate for zero-rated projects for “those eligible”, with the final scenes of the Life of Brian (“I’m Brian, and so’s my wife”).

Anyway, the scheme does not allow for VAT to be reclaimed on services, mainly because the service of constructing a new dwelling is zero-rated. This includes the incorporation of building materials into the property. This was the key issue for Mr Mort (did you see what I did there?) and his DIY claim.

HMRC had rejected almost half of Mr Mort’s original claim. By the time the matter came to Tribunal this had reduced but was still over £38k. HMRC’s view was that the disallowed VAT was VAT incorrectly charged on supplies of services that were [properly zero-rated as services rather than the standard rated goods.

Each challenged claimed was examined to establish if it was a supply of services (so no DIY claim as the VAT was not properly due), goods, (DIY claimable) or, where there were goods and services if there was one overriding supply with the other being ancillary. This alone was useful for those of us who deal with the DIY scheme, but perhaps the most important issue was that the Tribunal questioned why HMRC took this to Tribunal at all. 

If the VAT was not chargeable then HMRC’s actions were “to seek to retain VAT to which HMRC has no ultimate entitlement. This is inherently unsatisfactory.”

The Tribunal went on to say that the logical approach would have been for HMRC to “take steps” to repay suppliers who had erroneously charged VAT. I can put it no better than the Tribunal:

“In essence, HMRC choose to expend resources in defending an appeal before this Tribunal as a means of retaining a windfall that they accept they ought not have received. The proceedings in relation to this issue would be entirely obviated by HMRC simply facilitating the repayment of incorrectly-charged VAT to the supplier.”

“Questions could legitimately be asked as to whether HMRC’s approach accords with HMRC’s collection and management obligations and the effective use of Tribunal time.”

It would be good to see these statements having an impact on HMRC in dealing with similar matters. Whether they will only time will tell.

Electricity and VAT

This is a European case but highlights the complexity of VAT when there are a number of supplies and there is a need to establish if there is one overriding supply (and so one VAT rate) or if there is a mixed supply with mixed rates.

The taxpayer installed some electric vehicle charge points. The business planned to supply:

  • access to recharging devices, equipped with multi-standard chargers that provided both quick charging and slow charging connectors, including integration of the charger with the vehicle operating system;
  • the supply of electricity to the batteries of the vehicle; and
  • technical support.

A platform, website or application was also planned to allow customers to reserve a particular connector and view their transaction or payment history with the option to use an e-wallet.

The business considered the supply to be one of services but the VAT authority (Poland) said that it was a supply of goods.

For all of us schooled in the way of VAT this makes sense as electricity, gas, etc. have been classified as goods in the primary VAT directive to ensure equitable VAT treatment under the place of supply rules. Some headlines indicate that the writer was schooled in “other taxes”.

If you would like to discuss any of these VAT updates in more detail please contact  Ian Marrow. This article is from the latest issue of our VAT newsletter.

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