Weekly VAT News

Spring Budget 2024 – indirect tax measures

There were a number of indirect tax measures announced in the Spring Budget 2024 and accompanying Overview of tax legislation and rates. The government announced an increase in the VAT registration threshold from £85,000 to £90,000, and in the deregistration threshold from £83,000 to £88,000, with effect from 1 April 2024 (as well as the thresholds for acquisitions in Northern Ireland from EU Member States). These have been frozen since 1 April 2017. The UK VAT registration threshold is high when compared with other countries. The high threshold arguably causes a stagnation of growth for businesses as they reach the VAT registration threshold. Therefore, whilst an increase in the VAT registration threshold of £5,000 does create slightly more headroom for the smaller business, the fact that the threshold would have been over £100,000 if it had been indexed to inflation in the intervening years, and that it allows for only modest growth before the obligation to register is again crystallised, may suggest that this measure defers, rather than permanently addresses, any perceived issues. There will be a new duty on vaping products to take effect from 1 October 2026 (with a consultation also released) and a one-off increase in tobacco duty at the same time. The 2025-26 rates were set for air passenger duty and landfill tax. The freeze on the rate of fuel duty was maintained, including an extension to the temporary 5p reduction. The rate of alcohol duty will also be frozen, until 1 February 2025. Legislation will be introduced in the Spring Finance Bill to reform the Terminal Markets Order (TMO), including bringing trades in carbon credits within its scope. The consultation on the VAT treatment of private hire vehicles announced in the Autumn Statement 2023 will be published in April 2024. Further details on all the indirect tax measures from the Spring Budget can be found on TaxScape. A recording of our Dbriefs webcast on the Spring Budget is available to watch on demand. (Contact: Andrew Clarke)

Northumbria Healthcare NHS Foundation Trust: VAT and hospital car parking – CA

NHS hospitals which operate their own hospital car parks should ensure that users can park “as safely, conveniently and economically as possible”, according to guidelines issued by the Department of Health in 2015. Although these ‘2015 Parking Principles’ are guidance rather than specific requirements, hospitals are legally required to comply with them unless they have a good reason not to. In the Court of Appeal’s judgment in Northumbria Healthcare NHS Foundation Trust, this meant that the NHS operated car parks under a different legal framework to private car parks (which the court saw as being operated with a view to profitability). Consequently, NHS Northumbria was operating under a special legal regime, and (as a public authority) should not charge VAT on car parking unless this would lead to a significant distortion of competition with the private sector. In the court’s judgment, HMRC had not provided sufficient evidence at tribunal that such a distortion would arise. Distortion of competition could not be assumed based simply on participation in the car parking market. NHS Northumbria’s appeal was allowed. (Contact: David Walters)

Wm Morrison Supermarkets plc: VAT liability of Nakd and Organix bars – FTT

Are Nakd and Organix bars “confectionery”? In considering the matter of classification in Proctor & Gamble, the Court of Appeal held this “…is a short practical question calling for a short practical answer”. However, the answer involves a multifactorial assessment, and tribunals therefore have to set out which factors point to what outcome, and the weight they give to each. In Wm Morrison Supermarkets plc, the First-tier Tribunal originally concluded (in 2021) that the bars were confectionery, but the Upper Tribunal ruled (in 2023) that it had failed to pay any attention to the actual or perceived healthiness of the products and their ingredients (specifically the absence of cane sugar, butter and flour). Following a further hearing, the FTT has now decided that the most important indicators of whether the bars were confectionery were the look, feel and taste of the bars. The ingredients, production process, and circumstances of consumption were also significant. Less important were the healthiness of the bars, the packaging and marketing, and the target market for the bars. Taking all these factors into account, the FTT once again concluded that the bars were confectionery, and dismissed Morrisons’ appeal. (Contact: Donna Baker)

This week’s CJEU VAT case calendar

On 14 March, there will be a CJEU Advocate General opinion in the following joined cases from the Netherlands on the VAT treatment of pension fund management fees: X, Fiscale Eenheid Achmea, Y, Pensioenfonds voor Fysiotherapeuten, BPL Pensioen and BPFL. For further information about the cases, and a report on the hearing, see tax@hand. Also on 14 March, there will be an Advocate General’s opinion in Syndyk Masy Upadłości A, on the transfer by an insolvency practitioner of funds held in the VAT account.