Weekly VAT News

RCB 4 (2025): VAT deduction on the management of pension funds

HMRC have published Revenue and Customs Brief 4 (2025) on VAT deduction on the management of pension funds. The Brief announces a change in HMRC policy on employers’ ability to deduct VAT incurred on the administration of defined benefit pension funds and on the management of the fund’s assets. The policy change is to eliminate the dual use apportionment of investment costs by employers and trustees (that is, the 70/30 split on investment management and administration related costs); instead “all the associated input tax incurred will be seen as the employer’s and deductible by the employer, subject to normal deduction rules”. The impact of this change is a potential increase to VAT recoverability on both investment and administration costs, and simplified VAT accounting processes. Trustees supplying pension fund management services to employers will also be able to deduct input tax incurred for the purpose of providing those services, again subject to normal rules. The new policy will apply from 18 June 2025. HMRC also stated that they will publish additional guidance on the new policy by Autumn 2025. (Contact: Jack Bennett)

JPMorgan Chase Bank NA: single and multiple supplies – UT

JPMorgan Chase NA (CBNA) supplied services to JPMorgan Securities plc (SPLC) under an intercompany contract, namely business delivery services (BDS), relating to the trading infrastructure, and support services, more generic services, such as HR and legal. HMRC considered that the services formed a single taxable supply, whereas CBNA argued that there was a separate supply of support services (taxable) and multiple supplies of BDS to different SPLC business areas (VAT exempt). The First-tier Tribunal found that all the elements under the contract formed a single taxable supply, focusing on the fact that they worked together to provide “everything that it (SPLC) needs to enable it to achieve its aim of regulatory compliant trading”. Given that conclusion, it was not necessary for the FTT to consider whether exemption applied to the separate supplies, but it considered the issue briefly, concluding that none of the BDS qualified for exemption. The Upper Tribunal has upheld the FTT’s decision, confirming that there was a single taxable supply. The UT supported the FTT’s conclusion that the contracts could be relied upon as providing a complete picture of the economic reality between the parties. The UT also confirmed that the narrow approach to interpreting the scope of exemptions set out by the Supreme Court in Target Group Ltd, concerning the exemption for payment services, also applied to the exemption for securities, meaning the securities exemption should only apply to services that themselves alter the legal and financial relationship between parties to a securities transaction. The UT concluded that this test was not met with respect to CBNA’s services; CBNA merely provided infrastructure and fulfilled administrative functions surrounding transactions in securities. The UT dismissed CBNA’s appeal. (Contact: Nicole Faith)

Clatterbridge Pharmacy Limited: VAT treatment of medication supplied to outpatients – FTT

Clatterbridge Pharmacy Limited (CPL) is a subsidiary of Clatterbridge Cancer Centre NHS Foundation Trust. The Trust specialises in the treatment of cancer, and CPL operates pharmacies dispensing medication to outpatients of the Trust. One of the elements of CPL’s business is supplying intravenous (IV) and injectable cancer medication to patients of the Trust who receive care in their own homes. The medication is administered to patients by healthcare professionals, with CPL charging the Trust a fee. The First-tier Tribunal has held that the supplies were zero-rated on the basis that the medication was provided for patients’ ‘personal use’, in accordance with Item 1, Group 12, Schedule 8, VATA 1994. HMRC argued that zero-rating would only apply where medication was self-administered. HMRC were of the view that ‘personal use’ equated to use as a private individual, i.e., self-administered medication was for ‘personal use’, whereas medication administered by a healthcare professional was not. HMRC argued that notes are clarificatory only, and not determinative. Accordingly, Note 5A in Schedule 8 (which provides that ‘personal use’ does not include medication provided to patients in hospitals) means that ‘personal use’ in Item 1 excludes situations where medication is administered by a healthcare professional, regardless of the location. The FTT considered that HMRC’s interpretation was too restrictive. Agreeing with CPL, the FTT concluded that the concept of ‘personal use’ included use in a private setting, even if the medication, as in this case, was not self-administered. The FTT allowed CPL’s appeal against HMRC’s decision that its supplies were standard-rated. (Contact: Phil Simmons)

Extension to deadline for submission of final VAT returns – Direction

Under the amendment to the Value Added Tax Regulations 1995 (the VAT Regulations) made by the Value Added Tax (Amendment) Regulations 2025, HMRC were given the power to extend the time in which a business can submit its final VAT return. HMRC have now issued a Direction that provides that where a person required to make a final VAT return is notified of the effective date of their VAT registration cancellation after that effective date has passed, the deadline for submitting the final return is extended to one month from the date of the notification letter. (Contact: Donna Huggard)

VAT case calendar

On 24 or 25 June, the Court of Appeal will hear the taxpayer’s appeal against the Upper Tribunal decision in Hippodrome Casino Ltd on a floorspace-based standard method override.