Weekly VAT News

RCB 1 (2025): Ending the Alcohol Duty Stamp Scheme

HMRC have published Revenue and Customs Brief 1 (2025) on the end of the Alcohol Duty Stamp Scheme. As announced at Autumn Budget 2024, the Scheme will end on 1 May 2025. Under the Scheme, large retail containers of high-strength alcoholic products must be stamped with an alcohol duty stamp. From 1 May 2025, it will no longer be necessary to register, obtain or apply stamps to retail containers covered by the Scheme. Registrations and authorisations under the Scheme will end automatically. Records must be kept for retail containers that were stamped before the end of the Scheme for at least three years from the date the record was made. The Scheme is not being replaced with any new requirements at this stage. The Brief states that HMRC will continue to monitor the need for any anti-fraud measures in relation to alcohol products and the supply chain. The Brief reminds alcohol wholesalers and retailers to continue to comply with existing legal obligations, due diligence and the requirements of the Alcohol Wholesaler Registration Scheme. (Contact: Eleanor Caine)

Chelsea Cloisters Management Limited: Application of extra-statutory concession – FTT

Chelsea Cloisters Management Limited (CCML) is a management company for Chelsea Cloisters, a property of 656 apartments in London. The freehold owner is Realreed Limited, and the apartments are subject to long leases. CCML had not registered for VAT on the basis that it was supplying services to the leaseholders, and that its supplies were exempt under HMRC’s extra-statutory concession 3.18 (the ESC). Under the ESC, mandatory domestic service charges paid by both leaseholder and freeholder occupants of residential property are exempt from VAT. HMRC decided that CCML had been making standard-rated supplies of management services and registered CCML for VAT, on the basis that CCML was fulfilling its obligations to Realreed as the freehold owner, rather than making supplies to the leaseholders. The FTT has held that it did not have jurisdiction in respect of the substantive appeals, as it lacked jurisdiction to apply extra-statutory concessions. Nevertheless, the FTT went on to set out what it would have found if it had had jurisdiction, noting that its comments are obiter. The FTT considered that CCML made direct supplies of management services to the leaseholders, and that the service charges paid by the leaseholders to CCML were within the exemption provided by the ESC. Accordingly, the FTT would have held that HMRC’s decisions were unlawful. In its obiter comments, the FTT also concluded that CCML would have been entitled to rely on general principles of EU law, with the same outcome. (Contact: Ben Tennant)

Tax administration – NAO and PAC reports

The National Audit Office (NAO) has published a report on The administrative cost of the tax system. The report concludes that the cost to HMRC of running the tax system is increasing and that there is “evidence that the tax system is imposing increased administrative burdens on taxpayers and their intermediaries, despite the availability of digital channels”. The report makes a number of recommendations, encouraging HMRC to take a more holistic view of the cost effectiveness of the tax system and better understand the impact of administrative and policy changes, and to focus on simplification and increasing efficiency and productivity. The House of Commons Public Accounts Committee (PAC) has also issued a report on Tax evasion in the retail sector. HMRC estimate that tax evasion cost the UK £5.5 billion in lost revenue in 2022-23. However, given that the amount of VAT raised following the introduction in 2021 of legislation making online marketplaces liable for VAT from overseas sellers was five times greater than HMRC estimated, the PAC is concerned that HMRC have underestimated the scale of evasion. The PAC calls on HMRC to assess the reasons behind the difference, and to set out a strategy for dealing with evasion and deliberate non-compliance. The PAC also calls on HMRC, Companies House and the Insolvency Service to work more closely, particularly regarding the VAT registration process (given concerns around overseas businesses registering for UK VAT) and ‘phoenixism’ (companies artificially declaring themselves insolvent and running the same business in a new company). (Contact: Andrew Clarke)

Phishing email

The Association of Taxation Technicians has reported incidents of a phishing email purporting to be notification by HMRC of a compliance check into VAT returns. Recipients should not click on the link, and the note includes a reminder of what to look out for when considering whether an email may be a phishing email.