The UK will require all VAT invoices to be e‑invoiced by 2029, mandating machine‑readable formats and accredited transmission. The article outlines the scope, Peppol alignment, and a step‑by‑step timeline for 2026‑2028 to help finance, IT and procurement prepare. It highlights key milestones such as selecting an access point, adopting a canonical data model, and piloting with trading partners.

The interview with Fabian Barth, VAT Manager at Alvarez & Marsal, discusses the challenges of obtaining binding rulings in the UK, recent Supreme Court VAT cases in 2025, and his view that legislative changes should allow public law arguments in tribunals. He notes that the Hotel La Tour and Prudential cases downplayed CJEU precedent, and that European case law remains binding but is not always applied.

The Finance (No. 2) Bill 2024‑26 has been amended in Committee and will return to the House of Commons for further stages. Scotland will introduce a new Air Departure Tax on 1 April 2027, replacing APD, with a consultation closing 26 March 2026. Deloitte’s Advance Tax Certainty service will become operational from July 2026, while the OECD Global Forum on VAT met in January 2026 to discuss digital economy and near real‑time data collection.

The HMRC internal manual outlines the rules and procedures for calculating and managing default interest on VAT arrears. It covers legal powers, calculation methods, interest adjustments, and circumstances affecting default interest, providing guidance for HMRC staff and taxpayers.

The UK First‑Tier Tax Tribunal issued a judgment on 26 January 2026 clarifying the eligibility of input VAT deductions in cases involving fraud. The tribunal upheld HMRC’s denial of deductions for payments to four payroll service providers, finding that the taxpayers knew the transactions were connected to VAT fraud. The decision reinforces that knowledge of fraud can lead to denial of input VAT recovery.

The UK First Tier Tribunal ruled that payments under VPAG, PPRS and similar schemes are post‑supply price reductions, meaning the VAT originally paid was too high. The Upper Tribunal hearing is set for 9–11 February 2026, with a decision expected shortly after, potentially unlocking up to £2.5 billion in VAT reclaims for pharma and healthcare businesses. Companies can adjust VAT back up to four years by filing protective claims now.

KPMG’s weekly update highlights two contrasting VAT rulings on hair loss treatments and a key import‑VAT recovery case. The UK Tax Tribunal zero‑rated the Kinsey system for female hair loss as a service of adapting goods for a disabled person, while a surgical hair transplant was standard‑rated as cosmetic. The Yourway Transport decision clarified that a taxpayer can recover import VAT on drugs moved to other Member States when acting as an agent and deemed owner under s47.

Reform UK has proposed cutting the VAT rate on hospitality from 20% to 10% as part of a rescue package for pubs and restaurants. The article argues that the move would undermine VAT neutrality, add administrative complexity, and likely fail to lower consumer prices. It also notes that Germany announced a similar 7% hospitality VAT cut in January 2026.

HMRC released guidance on 28 January 2026 for developers of tax software that use generative AI. The guidance sets five mandatory principles—transparency, reliable source data, human oversight, security/GDPR compliance, and ethical AI with continuous auditing—to ensure AI outputs are trustworthy and legally grounded. Compliance requires clear disclosure, audit trails, limited data sources, and ongoing monitoring of models.

A UK Upper Tribunal decision allows a bespoke hair‑replacement system for severe female hair loss to be zero‑rated under Schedule 8 of the VAT Act 1994. The ruling expands the definition of disability to include social and psychological impacts and confirms that composite supplies that adapt goods can qualify for relief. The case clarifies that wigs and similar products are not automatically treated the same, opening new zero‑rating opportunities for adaptive products.

The UK Supreme Court’s 2025 decision in HMRC v Hotel La Tour Ltd clarified that input VAT on professional fees linked to a share sale is irrecoverable because the costs are directly tied to an exempt supply. The ruling confirms that the direct and immediate link test applies to share sales and that being part of a VAT group does not allow recovery of such fees. The judgment underscores the need for careful documentation to distinguish between exempt and out‑of‑scope transactions.

The UK First‑Tier Tax Tribunal issued a judgment on Jan. 9 clarifying input VAT deduction and zero‑rating rules for second‑hand car transactions. The case involved a company that purchased high‑value used cars in Northern Ireland and sold them to customers in the Republic of Ireland. The Tribunal found that the taxpayer could not claim the input VAT deduction and zero‑rating as the Tax Agency had denied the claims.

This HMRC internal manual provides guidance on the reverse charge procedure, a measure designed to counter criminal attacks on UK VAT. It outlines the application and implementation of the reverse charge mechanism for relevant transactions.

The UK First‑Tier Tribunal clarified that a logistics provider acting as an agent in its own name can recover import VAT on clinical trial drugs, overturning HMRC’s earlier denial. The tribunal held that the taxpayer’s lack of ownership and supply for consideration did not preclude input‑VAT treatment. The decision, case No. TC09749, was issued on 14 January 2026.

HMRC has introduced a new requirement for UK VAT registration, effective 19 January 2026, that businesses must provide the unique VAT registration application reference number before adding VAT to a Business Tax Account. This step aims to close a fraud window where criminals linked VAT numbers to Government Gateway accounts before the legitimate owner could log in. Businesses should safeguard the reference number and act swiftly after registration to mitigate fraud risks.

The UK Supreme Court confirmed that VAT incurred on adviser fees related to an exempt share sale is not recoverable, applying a strict two‑stage test that requires a direct and immediate link to the transaction. The ruling rejects the modified approach that allowed recovery based on intended use of proceeds and clarifies that VAT grouping does not alter the nature of a share sale. Businesses must conduct early VAT analysis for share disposals to account for irrecoverable adviser fees.

On 26 January 2026, the UK Supreme Court ruled that VAT incurred on adviser fees for an exempt share sale is not recoverable. The decision applies a strict two‑stage test, rejecting the modified approach that allowed recovery based on intended use of proceeds. The ruling closes the possibility of treating such costs as general overheads to fund taxable activities.

HMRC has reset UK VAT grouping rules, allowing overseas establishments to be treated as part of a UK VAT group and removing EU case law such as Skandia and Danske Bank. The new policy reduces cross‑border VAT friction and invites businesses to correct over‑declared VAT, while expanding HMRC’s discretion to deny grouping where it sees collection risk or distortive outcomes.

The UK government announced a £92m Places of Worship Renewal Fund on 22 Jan 2026, replacing the £23m Listed Places of Worship Grant Scheme that had allowed churches to reclaim VAT on repairs. The new fund removes VAT relief, meaning churches will now have to pay the standard 20% VAT on repairs, with the previous scheme having capped VAT‑exempt repairs at £25,000. The move aims to align churches with other heritage assets but raises concerns about the financial burden on congregations.

This article outlines the tax, National Insurance and VAT implications of Christmas gifts and gift vouchers for employees and customers in the UK. It explains the trivial benefit threshold of £50, the £300 cap for directors, and the VAT treatment for gifts over £50. The guidance also covers reporting requirements such as P11D and the conditions for tax‑deductible promotional gifts.