Weekly VAT News

RCB 6 (2025): VAT deduction on insurance intermediary services supplied outside the UK

HMRC have published Revenue and Customs Brief 6 (2025) on input tax recovery for insurance intermediary services supplied outside the UK, following the First-tier Tribunal decision Hastings Insurance Services Ltd. Although insurance intermediary services are VAT exempt, the EU Principal VAT Directive (PVD) allows input tax recovery for services supplied to customers outside the EU. This was implemented in the UK in the Value Added Tax (Input Tax) (Specified Supplies) Order 1999. In 2019, this was amended so that UK insurance intermediaries were only able to recover VAT where the party insured was based outside the UK. In Hastings, the FTT found that the 2019 amendment was incompatible with the PVD, and Hastings was able to rely on the direct effect of the PVD to recover input tax. In RCB 6 (2025), HMRC accept that insurance intermediaries can rely on the direct effect of EU law “to recover relevant input tax incurred prior to 1 January 2024, whether the insured party is in the UK or not”. However, the RCB gives HMRC’s view that, from 1 January 2024, the provisions of the Retained EU Law (Revocation and Reform) Act 2023 mean that direct effect can no longer be relied upon, and UK legislation cannot be disapplied on the basis that it is inconsistent with EU law. The RCB states that under section 28, Finance Act 2024, UK VAT law will continue to be interpreted in the same way as it was before 1 January 2024, with the exception that it is no longer possible to rely on the direct effect of EU law. Insurance intermediaries affected by the RCB are invited to review their input tax recovery and make a claim for under-recovered input tax if appropriate. (Contact: Nicole Faith)

1^st Alternative Medical Staffing Ltd: Supplies of nursing staff – FTT

1^st Alternative Medical Staffing Ltd (FAMS) supplied nurses and care assistants to NHS and private hospitals and care homes. FAMS accounted for VAT on their commission only, not on the amount paid to the nurses/care assistants, on the basis that FAMS was acting as agent. HMRC disagreed, and issued assessments for periods from 2014 to 2016, on the basis that VAT was due on the entire amount charged. In separate judicial review proceedings, the High Court and Court of Appeal held that FAMS could not rely on a 2004 HMRC letter that it was acting as agent, as HMRC’s policy had changed, as set out in a number of public statements. Also, FAMS could not retrospectively rely on the Nursing Agencies’ Concession, which allows employment businesses supplying health professionals as principal to treat supplies of medical staff as VAT exempt. The concession needed to be applied when invoices were issued. The case has now returned to the First-tier Tribunal, and the FTT has held that FAMS’ supplies were not VAT exempt. Supplies that are not themselves supplies of medical care are exempt if they are ‘closely related’ to medical care and supplied by a state-regulated institution. The FTT found that FAMS was not a state-regulated institution. While this finding disposed of the appeal, the FTT went on to find that FAMS’ supplies also did not meet the conditions for being ‘closely related’ to medical care. The FTT dismissed FAMS’ appeal. (Contact: Phil Simmons)

Sustainability and the supply chain – Deloitte article

Low-carbon policies, net zero targets, and measures such as green taxes and incentives are transforming supply chains, bringing both challenges and opportunities. A new Deloitte article, Sustainability and the supply chain: what tax teams need to consider, looks at the influence of climate measures and the role of tax professionals. By adopting a strategic role in working with the wider business to create stronger, more sustainable supply chains, tax teams can support compliance and gain competitive advantage.