Weekly VAT News

Temporary VAT zero rate for domestic electricity – Statutory Instrument

Following the government’s announcement on 21 July 2026, The Value Added Tax (Supplies of Domestic Electricity) Order 2026, with an accompanying tax information and impact note, has now been made to introduce a zero rate for domestic supplies of electricity in Great Britain from 1 October 2026 to 31 March 2027; currently subject to the reduced rate of 5%. (The order does not apply to Northern Ireland.) The zero rate applies to supplies for ‘qualifying use’, which covers ‘domestic use’ (supplies to homes and certain residential settings and supplies below a de minimis threshold) and non-business use by a charity. The definition of ‘qualifying use’ is the same as for currently reduced rated supplies of electricity. HMRC have issued RCB 10 (2026): Temporary zero rate of VAT for domestic electricity in Great Britain to explain the application of the zero rate. The RCB includes how to deal with billing periods that span 1 October 2026, namely suppliers may determine VAT liability on the date of the energy’s consumption, with meter readings HMRC’s recommended approach, although other methods may be used if they provide a fair and reasonable outcome. VAT Notice 701/19, Fuel and power, has also been updated. (Contact: Zoe Hawes)

RCB 8 (2026): VAT refunds for non-UK businesses in a VAT group

HMRC have published Revenue and Customs Brief 8 (2026), on changes to how non-UK businesses that are members of a VAT group outside the UK claim refunds of UK VAT. A non-UK business is a business that is not UK VAT-registered, does not have a business establishment or a fixed establishment in the UK, and does not make supplies in the UK. Before 1 January 2021, EU-established businesses that were part of a non-UK VAT group could submit UK VAT refund claims in their own name, but non-EU-established businesses had to submit claims through their VAT group’s representative member. From 1 January 2021, all non-UK businesses that were members of a VAT group had to submit claims through the representative member. In some cases, such as where the representative member was UK VAT-registered, the non-UK business was not able to claim a VAT refund. HMRC’s policy has now changed, and non-UK businesses that are members of a VAT group must submit their own UK VAT refund claims, not via the representative member. As a transitional measure, HMRC will accept claims for VAT incurred in the 2025/2026 year (1 July 2025 to 30 June 2026), due by 31 December 2026, from either the business that incurred the VAT or the representative member. HMRC have also said that they will review refund claims for VAT incurred from 1 January 2021 that were rejected because the representative member did not submit the claim, provided the business asks HMRC to do so before 31 August 2027. The RCB includes details of how to ask HMRC to review a claim. VAT Notice 723A, Refunds of UK VAT for non-UK businesses, has been updated accordingly. This is also a timely reminder to submit claims for the 2025/2026 year by 31 December 2026. (Contact: Alistair Lord)

GfC 20: Help with VAT on fund management services

HMRC have issued a Guidelines for Compliance (GfC), Help with VAT on fund management services — GfC20, setting out HMRC’s recommended approach to determining the VAT treatment of outsourced fund management services, and in particular, whether such services should be treated as a single supply or multiple supplies. Fund managers frequently outsource fund management services to third parties, often under master service agreements (MSAs), with separate contracts for more detailed information regarding services and fees for individual funds. The GfC states that a supply of services by a third party to a fund manager is only VAT exempt if the fund is a ‘qualifying fund’ and the services form a distinct whole that is specific to and essential for the management of that qualifying fund. This places significant focus on the single/multiple supply analysis, given that each supply can only have a single VAT liability – and many taxpayers will be looking to avoid a situation where a single supply of management services is made in relation to both qualifying and non-qualifying funds, resulting in the whole supply being treated as taxable. The GfC sets out four indicators to consider in determining whether a supply with multiple elements constitutes multiple supplies, namely: the number of suppliers; the view of the typical customer; the contractual terms and economic reality; and the legislative intention (that is, “these rules must not be used to extend the VAT exemption beyond what the law allows”). The GfC concludes that businesses providing fund management services can use the guidelines to determine whether the supply of services is a single supply or multiple supplies, and then apply the VAT exemption rules accordingly. (Contact: Alex Beattie)

Dbriefs webcasts

On Tuesday, 15 September at 12.00, there will be a webcast on HMRC Annual Report 2025/26. The webcast will discuss key themes and priorities; how digitalisation, AI and data analytics are reshaping HMRC’s approach; and the implications of increased compliance resource and activity.

On Thursday, 17 September at 12.00, the UK Tax Update – September webcast will cover the latest UK tax developments, with updates on news in corporate, employment, international, and indirect taxes.