Weekly VAT News

Scottish Budget 2026 to 2027

On 13 January 2026, Shona Robison MSP (Cabinet Secretary for Finance and Local Government) delivered the Scottish Budget 2026 to 2027. Included in the tax policy measures was an announcement that air departure tax (ADT) will be introduced on 1 April 2027. ADT is a wholly devolved tax that will replace air passenger duty (APD) in Scotland. Its implementation had been delayed until a solution was found to concerns over whether an exemption for the Highlands and Islands complies with the UK Government’s subsidy control regime. ADT will match the APD rates for 2027-28. A private jet supplement will be introduced in 2028-29. Other indirect tax announcements included confirmation that Scottish aggregates tax (SAT), to replace the UK aggregates levy in Scotland, will be introduced on 1 April 2026, assuming the necessary legislation is approved. The rate for the first year of SAT will align with the UK aggregates levy. Also, there will be an increase to Scottish landfill tax (SLfT) rates from 1 April 2026 to align with UK landfill tax rates for 2026-27. (Contact: Jen Donnachie)

Story Terrace Limited: Books or ghost-writing services? FTT

Story Terrace Limited produced biographies for customers, using ghost writers. Story Terrace considered that it was supplying books, which were zero-rated for VAT purposes. HMRC was of the view that Story Terrace was making standard-rated supplies of ghost-writing services. The First-tier Tribunal has agreed with Story Terrace. The FTT reviewed the evidence, including Story Terrace’s website, the contract with customers, and the relative costs of the ghost writers. The FTT considered that “the typical consumer would regard the provision of the book as qualitatively the most important element of the Appellant’s supply”. Accordingly, the provision of the book was the predominant element of Story Terrace’s supply. The FTT upheld Story Terrace’s appeal. (Contact: Donna Huggard

Stellantis Portugal: VAT and transfer pricing – CJEU AGO

Stellantis Portugal, S.A. (SP), based in Portugal, is a company operating in the motor trade and formerly part of the General Motors Group (GMG). SP purchased vehicles from GMG manufacturers, which it then resold to independent Portuguese motor vehicle dealers. In the event of manufacturing defects, the final customer went to the dealer to have them repaired, with the dealers charging SP the relevant costs. Under the terms of the transfer pricing (TP) contract concluded between GMG and SP, SP informed the GMG manufacturers of the costs of distributing the vehicles, including the cost of any repairs, as well as operating costs, and accordingly a positive or negative adjustment was made to the price of the vehicles sold to SP to arrive at the operating profit target. The Portuguese tax authorities were of the view that the GMG manufacturers were responsible for the repairs, and that the passing on of the costs by SP constituted a supply of services chargeable to VAT. Advocate General Kokott has disagreed. In her opinion, AG Kokott notes that TP rules are a direct tax mechanism to allocate the profits from one intra-group entity to another. That is not, in principle, relevant for the purposes of VAT law which is generally based on the existence of a supply for consideration. The relevance of a TP adjustment from a VAT perspective depends on what it relates to and how it is made. A TP adjustment made by means of separate (non-fictious) supplies of services for consideration constitute taxable transactions for VAT purposes. However, as in the case of SP, where the TP adjustment is made by means of an agreed variation to the sales price of a specific supply of goods, this is either a reduction or an increase in the taxable amount of the supply made. It cannot itself constitute a supply of services for consideration by the purchaser of the goods. (Contact: Andrew Clarke)

Attitudes to Trade Survey 2026

Deloitte’s annual Attitudes to Trade Survey, now in its fourth year, tracks sentiment towards international trade from UK business leaders. This year’s findings indicate that global trade volatility has become embedded in business planning, with 83% of respondents anticipating uncertainty to continue for at least 1-2 years, and 54% expecting uncertainty to continue for at least 3-4 years. Businesses report adapting to the shifting global tariff environment and geopolitical tensions by pursuing mitigation strategies such as market diversification, supply chain reorganisation, and pricing adjustments. Despite this backdrop, confidence in the UK government’s broader approach to trade policy continues to strengthen. Business leaders remain largely supportive of the UK’s growing network of trade agreements and the 2025 UK Trade Strategy was viewed positively. 70% of respondents expect the UK-EU trading relationship to improve over the next five years, with most business leaders supporting some degree of alignment with the EU. (Contact James Caldecourt)

This week’s CJEU VAT calendar

On 22 January, there will be a judgment in the joined cases of Agrupació de Neteja Sanitaria and Educat Serveis auxiliars on the application of the cost sharing exemption.