Weekly VAT News

Colaingrove Limited: Whether discretionary interest payable by HMRC – UT

The Upper Tribunal has held that Colaingrove Limited was not entitled to discretionary interest under section 84(8) VATA 1994 in respect of amounts of VAT overpaid by Colaingrove and repaid by HMRC. As noted by the UT, this is “perhaps, one of the final chapters in a very long-running series of VAT disputes”. HMRC had accepted that statutory interest was payable, but considered that additional, discretionary interest should not be due. The FTT had allowed Colaingrove’s claim for discretionary interest, and determined the rate as the margin between statutory interest paid and the Bank of England base rate plus 1.5%, but it rejected Colaingrove’s claim for discretionary interest in respect of decisions taken and/or VAT repaid post-1 April 2009, when the law changed. Both parties were granted permission to appeal. The UT has agreed with HMRC that section 84(8) did not apply to claims for overpaid VAT made, as in this case, under section 80 VATA 1994. Section 80 provided “a comprehensive statutory basis for reclaiming tax which had been unduly paid”, and did not provide for discretionary interest. Accordingly, the UT allowed HMRC’s appeal, and remade the FTT decision, dismissing Colaingrove’s application for further interest. Colaingrove’s appeal with respect to post-1 April 2009 decisions was also dismissed. (Contact: Rob Holland)

Late claims for input tax – HMRC manual

HMRC have amended their VAT Input Tax internal manual to update their guidance on How to treat input tax: late claims for input tax. The new guidance includes the circumstances in which HMRC will exercise their discretion to allow late claims for input tax. As well as situations where the supporting evidence has not been received, late claims will be allowed where the business has been carrying out due diligence to get their tax affairs right, and where the late claim is due to internal accounting procedures and governance (such as a cut-off date for processing invoices). HMRC will allow late input tax claims in these circumstances and in specific cases, provided HMRC are satisfied that late claims would not lead to input tax being overclaimed or less VAT being payable than if the input tax was claimed in the proper period. HMRC will not allow late claims where there is evidence of careless error or repeated late claims. (Contact: Andrew Clarke)

CBAM and EUDR – European Union update

On 29 September 2025, the European Commission announced the adoption of a regulation to simplify the EU’s carbon border adjustment mechanism (CBAM). The main focus of the regulation was to exempt smaller importing businesses from the application of CBAM, with some additional administrative simplifications. On 17 October 2025, the regulation was published in the official journal of the EU, and is accordingly now in force. (Contact: Zoe Hawes)

On 21 October 2025, the European Commission proposed some measures “to ensure a smooth implementation of the EU Deforestation Regulation” (EUDR). The EUDR aims to ensure that key goods placed on the EU market will not contribute to deforestation. The EUDR prohibits certain commodities and products derived from those commodities from being placed on or exported from the EU market unless certain deforestation-free requirements are met. Following a delay to the original implementation date of 30 December 2024, the Commission has confirmed that the EUDR will enter into force on 30 December 2025. Measures to ease compliance include reducing reporting obligations so that only the first placer on the EU market will have to file a due diligence statement, and the streamlining of documentation requirements. Also, there will be transitional periods for companies to strengthen their IT systems. For micro- and small businesses, this effectively means that the EUDR will apply from 30 December 2026. For other companies, the application date remains 30 December 2025, but there will be a grace period of six months for checks and enforcement. (Contact: Eleanor Caine)

VAT case calendar

On 29 October, the Supreme Court will deliver its judgment in Northumbria Healthcare NHS Foundation Trust on VAT and hospital car parking.