Weekly VAT News

Spring Statement 2025: Indirect tax measures

As expected, the Spring Statement 2025 included minimal indirect tax content. On VAT, it was announced that the government will increase late payment penalties for VAT taxpayers (and income tax self-assessment taxpayers as they join Making Tax Digital) from 6 April 2025. The new rates will be 3% of the tax outstanding where tax is overdue by 15 days, plus 3% where tax is overdue by 30 days, plus 10% per annum where tax is overdue by 31 days or more. From a customs perspective, the government “is accelerating change at HMRC, including through introducing voice biometrics, using AI in customer services and compliance, and running a customs digitalisation pilot sharing trusted trader credentials with US Customs and Border Protection”. The government has also confirmed its intention to simplify the tax and customs systems, with HMRC to publish a transformation roadmap in the summer. (Contact: Andrew Clarke)

Climate Change Levy: Electrolytic hydrogen – Consultation

At the Spring Statement 2025, the government also announced a commitment to remove Climate Change Levy (CCL) costs from electricity used in electrolysis to produce hydrogen. The intention is to “support the growth of low carbon electrolytic hydrogen production, which will play an important role in decarbonising the power system and hard to electrify industrial and transport sectors”. HM Treasury has issued a consultation seeking input on the best legislative approach to remove the CCL costs, in particular to avoid unintended consequences. The government also announced a wider review of CCL, and the consultation seeks views on other areas where review of CCL may be necessary for alignment with the “changing energy landscape and the government’s clean power and net zero missions”. The consultation closes on 7 May 2025. (Contact: Zoe Hawes)

Bolt Services UK Limited: Application of TOMS to ride-hailing services – UT

The Upper Tribunal has agreed with Bolt Services UK Limited that Bolt should account for VAT under the Tour Operators’ Margin Scheme (TOMS) on the supply to passengers of private hire vehicle ride-hailing services, upholding the FTT’s decision. The FTT had held that the supply was a service commonly provided by tour operators or travel agents. On appeal, HMRC argued that the FTT’s ‘high-level’ approach when considering whether services are of a kind commonly provided by tour operators/travel agents was wrong. HMRC considered that the correct approach was to ask whether the supply by Bolt in particular was identical or comparable to services supplied by tour operators/travel agents. HMRC also contended that the supply was materially altered or an ‘in-house’ supply, combining bought-in services (drivers) with Bolt’s own resources (the app platform), and therefore outside the scope of TOMS. The UT acknowledged that while TOMS was designed for traditional tour operators, its scope is not limited to them, and that the key factor is the nature of the services provided, not the classification of the provider. The UT agreed with the FTT that a ‘high-level’ approach to comparing Bolt’s services with those of traditional operators was appropriate. Addressing HMRC’s argument that the supply was ‘in-house’, the UT considered that the drivers’ services directly benefited passengers, not Bolt, and were not materially altered or an in-house supply. Accordingly, the UT found that the supply was comparable to those of traditional tour operators/travel agents and was provided for the direct benefit of travellers, satisfying the key requirements of TOMS, and dismissed HMRC’s appeal. (Contact: Donna Huggard)

St Patrick's International College Limited & Ors: VAT and Alternative Providers of higher education – UT

St Patrick’s International College Limited and two other institutions providing higher education argued that their supplies of education services should be VAT exempt under the direct effect of the EU Principal VAT Directive (PVD) or the Value Added Tax Act 1994 (VATA). The institutions were Alternative Providers (APs), which, unlike Higher Education Institutions (HEIs) and Further Education Corporations (FECs), are not included in VATA as ‘eligible bodies’ entitled to VAT exemption. HMRC considered that exemption did not apply, and the Upper Tribunal has agreed with HMRC. The institutions would be able to rely on the direct effect of the PVD if its implementation in the UK breached fiscal neutrality. However, agreeing with the FTT, the UT found that the UK was entitled to treat APs differently from HEIs and FECs, given the different regulatory regimes that applied, and that there had been no breach of fiscal neutrality. The institutions also argued that the consideration payable for their services (fees were mostly funded by student loans) was “ultimately a charge to funds provided by the Secretary of State”, and therefore exempt under VATA. The UT rejected this argument, on the basis that a loan to a student was not consideration for the supply of education, and that at the time of supply it was not known whether the student would repay the loan. Finally, one of the institutions was an ‘eligible body’ with respect to its teaching of English as a foreign language (TEFL). The UT concurred with the FTT’s finding that exemption applied to the supplies of TEFL, but did not extend to all the educational/training services supplied. Accordingly, the UT rejected all the institutions’ arguments, and refused their appeal against the FTT’s decision. (Contact: Laurie Pay)

This week’s CJEU VAT calendar

On 3 April, the CJEU will deliver judgments in Cityland on VAT deregistration for failure to comply with VAT obligations and Grzera on whether residential property development was an economic activity. There will also be Advocate General opinions released in Arcomet Towercranes on the VAT treatment of transfer pricing adjustments and Kosmiro on the VAT treatment of debt factoring services.

Dbriefs webcast

On Wednesday 2 April at 12.00, there will be a Dbriefs webcast on Tariffs: what are the tax implications for your supply chain? The webcast will be hosted by Clive Tietjen and the panel will discuss the geopolitical environment, the tariff landscape and what is on the horizon; how businesses can plan for uncertainty; and the wider tax implications.