Weekly VAT News

VAT on domestic electricity – government announces reduction

The government has announced that the zero rate of VAT will apply to supplies of domestic electricity from 1 October 2026. Currently the reduced rate of 5% applies. The government stated that its expectation is that suppliers will pass the VAT reduction on to their customers, including those on fixed tariffs. (Contact: Andrew Clarke)

Opus Labour Services Limited & Anor: Constructive knowledge – UT

HMRC denied Opus Labour Services Limited (a recruitment company providing staff to the construction industry) input tax recovery in respect of certain transactions, and imposed penalties on the company and personal liability notices on the director, on the basis that the transactions were connected with the fraudulent avoidance of VAT and that Opus knew or should have known that this was the case. The First-tier Tribunal found that Opus did not have actual or ‘blind-eye knowledge’ of the connection to fraud, but did have constructive knowledge, that is, Opus should have known of the connection. The Upper Tribunal has upheld the FTT’s decision. The UT held that the FTT applied the Kittel test for demonstrating constructive knowledge correctly. In particular, the FTT was not obliged to determine constructive knowledge by applying an ‘only reasonable explanation’ test, as that is not the only way of establishing constructive knowledge. The UT found that the FTT adopted the correct approach by considering “the objective position of the reasonable businessman”. The UT also held that the FTT had provided adequate reasons for its decision. The UT dismissed Opus’ appeal. (Contact: Adam Routledge)

Scottish air departure tax – consultation response

Air departure tax (ADT) will be introduced in Scotland on 1 April 2027. ADT is a wholly devolved tax that will replace air passenger duty (APD) in Scotland. The Scottish government has published its response to a consultation on the implementation of ADT. The consultation sought views on the operation and future policy direction of ADT, including a potential higher rate of ADT for private jets, and on a proposed Highlands and Islands ADT exemption. Following the consultation, the Scottish government has decided to introduce an exemption from ADT for the Highlands and Islands. A private jet supplement will apply in 2028-2029 (for the 2027-28 year the Scottish government has already committed to matching the UK government’s APD rates and bands). (Contact: Conor O’Brien)

Corporate criminal offences statistics – HMRC update

HMRC have updated their statistics on investigations of corporate criminal offences (CCO) for the failure to prevent the facilitation of tax evasion. As at 30 June 2026, HMRC had secured one charging decision, with an additional 13 live CCO investigations. A further 27 identified cases were under review as to whether they should proceed to an investigation. The cases identified span 11 business sectors. To date, HMRC have reviewed and rejected an additional 136 cases. However, HMRC note that some of these previous investigations have led to satisfactory explanations that have caused CCO investigations to be dropped, but have instead led to other potential tax and regulatory offences being pursued. (Contact: Donna Huggard)