Overview
Welcome to our VAT: 60 Second Update Hub.
Menzies’ VAT team share the most recent VAT updates each month.
Look forward to an update each month, and access all of our past updates here.
November Update:
VAT on Private School Fees:
As you will no doubt have seen in the Budget, from 1st January 2025, VAT will be charged at the standard rate on private school fees. Please see Sarah Barron’s recently published FAQs.
Sarah will be holding a webinar on Monday 9th December at 9:30am, aimed at school bursars, to discuss the practical implications of VAT and private schools. Please fill in the sign up details should any of your clients and contacts be interested:
Northern Ireland Trading
There have been some recent updates to the regulations around the movement of goods, in parcels or large letters, between Great Britain and Northern Ireland. These were due to come into effect on 30 September, but have now been delayed.
Fixed Establishment
The Tribunal recently rejected an appeal against a decision to refuse an application for a US company with a UK branch, to join a UK VAT group. The appeal failed because, at the time the application was made, the company did not have a fixed establishment in the UK. At that time, three of its future four employees had not yet signed their employment contracts, nor begun work for the UK branch and the fourth was still working mostly for another group entity. There was also no evidence of any formal agreement under which the UK branch would occupy the office space allocated to it.
Although there were other factors to this case, it is interesting to see the criteria the Tribunal examined in relation to establishment, which can often be a contentious area, when applying to register overseas businesses for UK VAT.
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Previous updates:
September Update:
VAT free wigs?
The Tribunal ruled that female hair loss treatment cannot be zero-rated for VAT as hair loss is not a disability. The treatment, involving a custom wig and mesh, is deemed a supply of services. Hair loss lacks the long-term, severe impact required to qualify as a disability or a chronic illness under VAT relief criteria.
Private schools and VAT – Watch this space!
New VAT legislation is set to take effect from 1 January 2025, with antiforestalling measures applying from 29 July 2024. This may significantly impact private school attendance, with surveys predicting a 3–10% reduction in pupils, potentially increasing demand for state school places. Affected entities should prepare promptly as the consultation concludes.
Conflicting Caravan Construction
A taxpayer was wrongly advised by HMRC that a static caravan qualified as a new build, zero-rated for VAT. They claimed a refund under the DIY housebuilder scheme, but HMRC rejected it as caravans aren’t eligible. Despite tribunal sympathy, the judge ruled they lacked authority to hold HMRC accountable for the incorrect advice, dismissing the appeal.
August Update:
VAT484 change of details form
From 5th August 2024 VAT484s may no longer be accepted unless the client is digitally excluded.
This was inevitable considering the spate of fraud cases where client’s bank account details had been altered to receive a VAT refund to those of the fraudster’s account….
School fees
It is widely expected that private school fees will become subject to VAT in 2025, however we anticipate that there will be anti-forestalling legislation within the next few weeks to prevent prepayment being an effective way to avoid the charge.
HMRC’s updated VAT application response times
HMRC have extended their response times:
– VAT deregistration applications extended from 30 working days to 40 working days.
– VAT group applications extended from 15 working days to 40 workings days.
The response time for VAT registration applications remains at 40 working days.
The response times would be subject to any queries raised by HMRC whilst processing the application.
Supply chain due diligence
There is increased activity from the Fraud Investigation Team at HMRC, checking and disallowing VAT until they are convinced that there is no loss of VAT in supply chains. They are particularly concerned about supplies of staff by agencies, and we have seen activity in construction and also hospitality sectors.
Get in touch
If you would like any further information on the topics above, please do not hesitate to contact our VAT team, or contact us via the form below: