Weekly VAT News

VAT recovery on pension scheme services – HMRC guidance

Following the publication of Revenue and Customs Brief 4 (2025) in June 2025, HMRC have updated their guidance regarding the deductibility of VAT incurred on services relating to funded occupational pension schemes. The guidance has been published in HMRC’s VAT Input Tax Manual from VIT44600 to VIT44750. Prior to RCB 4 (2025), HMRC made a distinction between scheme-related ‘administration’ and ‘investment’ services, and generally accepted that the sponsoring employer of a scheme could treat the VAT incurred on ‘administration’ services as its input tax, provided the employer held an invoice addressed to it, even if the employer had not contracted for or paid for the services. HMRC also previously accepted that, where a third-party manager of a scheme provided both administration and investment services, the employer could treat 30% of the VAT as its input tax. According to the updated guidance, HMRC now consider that to be able to recover the VAT charged on any scheme-related service, sponsoring employers must have directly contracted for that service. HMRC no longer recognise any distinction between administration and investment services, and the VAT Input Tax Manual guidance no longer includes the ‘70/30 split’. Finally, the updated guidance includes several references to ‘onwards supply’ arrangements, under which the scheme trustee(s) would receive the scheme-related services and would use them to make an onwards taxable supply to the employer (of running the pension scheme on the employer’s behalf). HMRC’s intention seems to be for employers and schemes to implement such arrangements in order to facilitate VAT recovery for the employer, although a number of issues would still need to be resolved. Although published on 4 June 2026, the updated guidance sets out HMRC’s policy from 18 June 2025, that is, the date of the RCB. (Contact: Alex Beattie)

Temporary reduced VAT rate – SI

The Value Added Tax (Reduced Rate) (Hospitality and Tourism) Order 2026 has been made to implement the temporary reduced VAT rate of 5% for supplies of children’s meals, children’s tickets, and family attractions from 25 June 2026 to 1 September 2026, inclusive. The reduced rate does not apply to supplies that are already exempt from VAT. The Order adds two groups to Schedule 7A, VAT Act 1994. Group 17 applies to supplies in the course of catering (not takeaway meals) that are part of a children’s meal, being a meal “which is only held out for sale as a meal for a child”. Group 18 covers children and family (including at least one child) tickets to shows, exhibitions, theatres, concerts, and cinemas; and all tickets to circuses, fairs, amusement parks, adventure parks, soft-play centres, zoos, observation attractions, farm visitor attractions, and nature reserves, and to museums and other similar cultural facilities. The reduced rate does not apply to sporting events or facilities, or an event or facilities for physical education or recreation. The Order includes rules setting out how the reduced rate applies to tickets for multiple admissions, including for admissions outside of the relevant period. (Contact: Andrew Clarke)

HBS Enterprises Ltd: VAT and online marketplaces – FTT

HBS Enterprises Ltd is a UK-established VAT registered online retailer. HMRC assessed HBS for VAT on sales of goods located in the UK to customers through an online marketplace. Where a non-established taxable person (NETP) supplies goods domestically in the UK to non-taxable persons through an online marketplace, the marketplace is treated as the ‘deemed supplier’ and must account for the VAT. The marketplace treated HBS as a NETP, based on information held at the time. Accordingly, it applied the deemed supplier rules and accounted for UK VAT on certain sales made by HBS, which it deducted from the amount paid to HBS. Based on this, HBS did not account for the VAT on these sales. The First-tier Tribunal has found that, as HBS was UK-established, the deemed supplier rules did not apply, and HBS retained the legal obligation to account for UK VAT on its sales, irrespective of the marketplace having already accounted for the VAT. The FTT allowed HBS’s appeal against HMRC’s assessment in part because of errors made by HMRC in calculating the assessment. (Contact: Harry McDowell)

Freeports technical handbook

HMRC have published Freeports technical handbook, providing guidance on the Freeports customs procedure. The handbook sets out background information on Freeports. It details operators’ responsibilities, liabilities, and record keeping requirements. It also provides information on the use of Freeports, including permitted activities, customs declarations, record keeping, dealing with excise goods, and the processing and supply of goods. (Contact: Jeffrie Mann)

This week’s CJEU VAT case calendar

On 10 June, there will be a judgment in Cavert, a reference from the Netherlands on the application by a VAT group of the VAT exemption for healthcare. On 11 June, there will be an Advocate General opinion in Isolanti Group, a reference from Italy on the availability of a simplified dispute resolution mechanism.

Dbriefs webcast

On Wednesday, 10 June at 12.00, the UK Tax Update – June webcast will cover the latest UK tax developments, with updates on news in corporate, employment, international, and indirect taxes.