The newsletter covers recent VAT developments, including a new EU customs duty for low-value parcels, a UK Supreme Court ruling affecting VAT recovery on fundraising activities, and a change in VAT treatment for locum doctors following HMRC's decision not to appeal a tribunal ruling.

The VAT Refunds Manual is an HMRC internal guidance document outlining procedures for traders to claim VAT refunds. It covers eligibility, claim requirements, time limits, verification, handling of abusive or unjust enrichment claims, end‑customer refund claims, refusal procedures, appeals, and penalties.

The UK Supreme Court ruled on 15 January 2026 that VAT on professional costs incurred in connection with a VAT‑exempt share disposal is not recoverable, rejecting any general fundraising exception. The decision applies to corporate groups where the parent provides taxable management services to a subsidiary, confirming that share sales remain within the scope of VAT but exempt, and that VAT grouping does not alter this treatment. Taxpayers must therefore plan for non‑recoverable transaction costs when restructuring or disposing of subsidiaries.

This guidance handbook from HMRC explains customs authorisations in detail, covering their purpose, eligibility, application procedures, compliance requirements, guarantee types, authorisation management, appeals, renewal, and the legal framework. It serves as a technical reference for businesses and customs officials to correctly apply for and manage customs authorisations.

The UK Supreme Court is hearing a case on whether Hotel La Tour Ltd can recover the VAT paid on professional fees incurred to facilitate the sale of shares in its subsidiary. The dispute centers on the link between the input VAT and the company’s taxable activities. The judgment, issued 17 December 2025, will clarify the recoverability of such VAT in similar share‑sale contexts.

The First‑tier Tribunal (Tax Chamber) upheld HMRC’s VAT liability ruling that Story Terrace Limited’s supplies are standard‑rated ghost‑writing services, not zero‑rated books. The decision, issued on 11 December 2025, confirms the classification under the Value Added Tax Act 1994.

The Deloitte TaxScape weekly VAT news update covers a First‑tier Tribunal ruling that allows Littlewoods to recover full input tax on photography costs, the withdrawal of HMRC’s linked‑goods concession under the ESC, and significant changes to the EU Deforestation Regulation effective 30 December 2026 for large and medium businesses. It also notes the removal of printed materials from the EUDR scope and the publication of these changes in the Official Journal on 23 December 2025.

The UK Government brief confirms that the VAT exemption for deputising services extends to all temporary medical staff, including locum doctors supplied by employment businesses, following a 2025 First Tier Tribunal ruling. Businesses that have charged standard‑rate VAT on such supplies within the last four years can claim a refund via an error‑correction notification. The brief also outlines the steps for claiming refunds and the impact on recovered input tax.

The UK First‑Tier Tax Tribunal ruled on 16 December 2025 that photography costs used for product catalogues and an online store by an online retailer with integrated financial services are fully recoverable input VAT, as they are used for taxable retail supplies. The decision clarifies that such costs are not partially recoverable due to mixed use with exempt financial services.

The UK First‑Tier Tax Tribunal clarified that caregivers supplied to nursing and residential care homes are not VAT‑exempt unless they are registered medical professionals or supervised as required. The tribunal found that the taxpayer's services did not meet the exemption criteria and no other exemptions applied. The decision was issued on 16 December 2025.

On 17 December 2025 the UK First‑Tier Tax Tribunal ruled that companies trading in telephone calling cards are liable for VAT and penalties, rejecting their claim to recover input VAT on purchases from a Hong Kong supplier. The tribunal held that the companies acted as principals, not agents, and failed to hold valid VAT invoices.

The Post Office provides guidance for UK sellers on how the Import One Stop Shop (IOSS) scheme applies to sales into the EU. Items under €150 can be covered by IOSS, allowing buyers to pay duties and fees at purchase, while items over €150 or sold outside IOSS require duties to be paid by the recipient or via pre‑paid services. Gifts under €45 are exempt from duties and fees.

Under new UK legislation, businesses will no longer pay VAT on goods donated to charity, effective 1 April 2026. The change removes the current requirement for VAT on free gifts to charities, while donated resale goods remain zero‑rated. The relief aims to reduce waste and administrative costs for businesses and charities alike.

This HMRC internal manual provides guidance on VAT assessments, error correction, amendments, and withdrawals. It outlines procedures for dealing with MTD customers, powers of assessment, and remission of tax. The manual serves as a reference for HMRC staff handling VAT assessment processes.

HMRC guidance clarifies that input tax must normally be claimed in the accounting period when the tax became chargeable, but allows late claims under Regulation 29 if circumstances such as missing evidence or internal cut‑off dates apply. HMRC will not permit late claims if the capping limit has passed, if there is evidence of careless error or repeated late claims, and partially exempt taxpayers must recover only to the extent the tax would have been deductible. Staff should seek advice from the VAT Deductions Team or Tax Administration Policy Team when potential manipulation or contrived delays are suspected.

This manual provides HMRC staff with guidance on cross‑border exchange of information under UK international exchange agreements. It covers core principles, legal framework, specific forms of exchange, country‑by‑country reporting, automatic exchange of financial accounts, guidance on tax rulings, disclosable arrangements, mandatory disclosure rules, crypto‑asset reporting framework, and reporting rules for digital platforms.

HM Revenue & Customs confirms that the Extra Statutory Concession for linked goods, previously outlined in Notice 48, is no longer required. Supplies that were eligible for the concession will now be treated as single supplies under the standard VAT legislation, following existing case law. This change simplifies compliance by eliminating the need for the concession.

UK consumers buying from EU retailers may face extra customs duties, import VAT and courier handling fees on orders over £135, while orders £135 or less are exempt from additional charges. The new rules require EU sellers to register with HMRC and consumers can refuse extra fees but must pay to receive goods. Reclaiming overcharged duties and VAT is possible through specific customs forms, though courier fees are generally non‑reimbursable.

Fabian Barth examines how HMRC’s positions on input tax deduction have varied across cases, citing Royal Opera House, Hotel La Tour, and Littlewoods. He highlights contradictory stances on LVCR trade in the Channel Islands, underscoring the complexity of VAT compliance. The post emphasizes that court rulings and precedent shape the practical application of VAT rules.

Morrisons has lost a VAT court case, resulting in a £17 million tax bill. The ruling confirms the supermarket’s liability for unpaid VAT and underscores the importance of strict compliance for retailers. The decision may serve as a precedent for future VAT disputes in the UK.