Category: VAT

Extending Deemed Reseller Rules to Combat VAT Fraud – Can It Work?

Posted on by Farazia Gillani

The growth of e‑commerce has transformed how goods are bought and sold, but it has also opened new avenues for tax fraud. Under the UK’s current deemed reseller rules introduced in 2021, online marketplaces must collect VAT on sales where the seller is not established in the UK. UK‑established sellers continue to account for their own VAT, benefiting from the £90 000 registration threshold. 

Amazon argues that this split system has become a structural weakness because bad actors can use shell companies and falsified documents to look UK‑based and avoid VAT. Independent analysis suggests that up to £3.2 billion of marketplace sales each year may slip through the net. 

This article examines Amazon’s VAT proposal to extend deemed reseller rules to all marketplace sales, summarises the potential benefits and challenges, and offers guidance for businesses.

The Current VAT Rules and the Loophole

Under the existing regime, marketplaces are liable for VAT on goods from overseas sellers and consignments worth up to £135. Goods located in the UK and sold by overseas sellers are also covered. HMRC expects marketplaces to determine whether sellers are UK‑established, but it does not share key data, such as PAYE records, with marketplaces. 

As a result, platforms rely heavily on documents provided by sellers – which are increasingly forged. Fraudsters break shipments into small consignments and falsely claim to be UK‑established. The National Audit Office noted that there is little risk of penalties for sellers who misrepresent their establishment status, and that over 5 million indicators of shell‑company use have been flagged.

Because marketplaces are only responsible for VAT collection on non‑UK sellers, the system creates a price advantage for dishonest traders. They can undercut compliant UK businesses by up to 20% – the standard VAT rate – because they do not charge VAT. Honest sellers are left to navigate complex place‑of‑establishment checks, while evaders exploit gaps in the rules. HMRC and the marketplaces therefore remain “one step behind” evolving fraud tactics.

Amazon’s Proposal: A Universal Marketplace Facilitator VAT Model

To close the loophole, Amazon proposes that marketplaces should collect VAT on all third‑party sales, regardless of whether the seller is based in the UK or overseas. 

Under this marketplace facilitator VAT model, platforms would be responsible for calculating, charging and remitting VAT on every sale. Amazon estimates that the change could raise up to £700 million in additional revenue each year: around £541 million from sellers who should already be VAT‑registered and £160 million from currently unregistered sellers.

Advocates note that similar regimes already exist elsewhere. Since 2021, Amazon has collected over £6 billion in VAT on sales by overseas sellers. The United States has marketplace facilitator rules in 46 states, and Switzerland adopted comparable rules in January 2025, with little controversy. The EU’s VAT in the Digital Age package also envisages extending deemed reseller rules to more goods and services.

Potential Benefits of Market Facilitator VAT Model

Designing out fraud: 

Making marketplaces collect VAT for all sellers removes the incentive to masquerade as UK‑based. Fraudsters could no longer avoid VAT by changing their apparent establishment status. HMRC would deal with a handful of large platforms rather than pursuing thousands of individual sellers.

Revenue gains: 

Independent analysis suggests that non‑compliance currently deprives the Exchequer of billions in VAT. Amazon’s VAT proposal puts the potential revenue uplift at £700 million per year, which could help fund public services.

Level playing field: 

Compliant businesses no longer face a 20% price disadvantage. Honest small businesses would be able to compete with overseas sellers on fair terms. Extending deemed reseller rules to UK‑established sellers was one of the measures recommended by the Retailers Against VAT Abuse Schemes (RAVAS) to stop abusive behaviour and protect law‑abiding businesses.

Simplified compliance for some SMEs: 

For sellers that operate only through a marketplace, VAT accounting could be handled by the platform. Many micro‑businesses would no longer need to calculate output VAT or worry about registering for VAT once they cross the threshold.

Design Challenges and Risks

Despite its appeal, the universal marketplace facilitator model raises significant issues that need careful policy design:

Impact on micro‑businesses: 

The current £90 000 registration threshold allows small traders and hobby sellers to operate VAT‑free. A universal deemed supplier regime would effectively extract VAT on all marketplace sales, even when the seller is below the threshold. This could wipe out the profit margin for low‑turnover businesses and force some to exit marketplaces.

Pricing and inflationary effects: 

Marketplaces would need to enforce VAT‑inclusive pricing. Sellers receiving only VAT‑exclusive amounts may raise their listed prices to maintain margins, while platforms might adjust fees to cover new compliance costs. The combined effect could push up consumer prices.

Channel distortion: 

Sellers below the threshold could still make VAT‑free sales through their own websites, creating a two‑tier pricing structure. This may encourage migration from marketplaces to direct channels such as Shopify or social commerce platforms.

Administrative complexity: 

The reform shifts rather than eliminates complexity. Businesses selling both on marketplaces and directly would have to manage split compliance – traditional VAT accounting for direct sales and separate marketplace accounting for platform sales. For marketplaces, handling VAT on all domestic sales would entail new systems for rate determination, discounts, vouchers and multi‑component pricing.

Flat rate and margin schemes: 

Sellers using the VAT flat rate or second‑hand margin schemes would need to reconcile the VAT collected by the marketplace with the VAT actually due. The platform would charge standard‑rate VAT on sales, and the seller would later apply the appropriate percentage or margin in their VAT return.

Cash‑flow implications: 

VAT‑registered businesses that sell mainly through marketplaces could become repayment traders. The platform would remit the output VAT, but the seller would still file VAT returns to reclaim input VAT. Amazon’s modelling suggests the number of repayment traders could rise by 12%, with repayments increasing by around 6%, adding cash‑flow pressure.

What Needs Further Consideration

Policy‑makers and tax advisers need to address several unresolved questions:

Treatment of sub‑threshold sellers: 

Should micro‑businesses under the £90 000 threshold be exempted from marketplace VAT collection? A clear carve‑out mechanism is necessary so that platforms can identify sellers who remain outside the VAT net. Without this, small hobby sellers could be pushed out of the market.

Dual‑channel compliance: 

Sellers using both marketplaces and their own websites will face split accounting. Guidance and software tools will be needed to help them manage two sets of VAT records.

Interaction with special schemes: 

Clarifying how flat rate, second‑hand margin and other schemes apply when a marketplace has already collected VAT is essential to avoid overpayment or underpayment.

Data sharing and verification: 

The NAO highlighted that marketplaces lack access to HMRC data, making it hard to verify seller status. Stronger data‑sharing arrangements and centralised verification could help ensure that only genuine UK‑established businesses are treated as such.

Transitional arrangements: 

Introducing a universal deemed reseller regime would require significant system changes for marketplaces and sellers. Adequate lead time and consultation are critical to avoid disruption.

How We Help Online Sellers in UK

At Apex Accountants, we support e‑commerce businesses and marketplace sellers with VAT compliance and strategic tax planning. Our services include:

  • VAT registration and returns: We advise when a seller must register for VAT and handle registration and ongoing filings. We can also assist with One Stop Shop (OSS) registrations for cross‑border EU sales.
  • Marketplace VAT compliance: Whether under current rules or future marketplace facilitator regimes, we help sellers understand their obligations. We assist with record‑keeping, reconciliations and dealing with marketplace statements.
  • Flat rate and margin schemes: If you trade in second‑hand goods or prefer the flat rate scheme, we calculate the correct VAT due and reconcile it with any VAT collected by platforms.
  • Customs and import VAT: For sellers importing goods, we manage import VAT, duty classification and the postponed VAT accounting method. We ensure that you reclaim input VAT correctly.
  • Digital commerce strategy: We provide guidance on pricing, cash‑flow planning and the impact of potential rule changes. Our team monitors policy developments so that clients can adapt swiftly.

Conclusion

Extending the deemed reseller rules to all marketplace sellers is a bold proposal aimed at tackling VAT fraud and levelling the playing field. There is strong evidence that the current two‑tier regime is being exploited by bad actors, with billions in sales evading VAT. Making marketplaces responsible for VAT on every sale could raise substantial revenue and remove incentives for fraud. However, the policy would shift significant compliance burdens onto platforms and could have unintended consequences for micro‑businesses, pricing and competition. Policymakers must balance the goals of closing loopholes with protecting small traders and preserving a diverse digital marketplace. Businesses should stay informed and seek professional advice to navigate both current obligations and potential future changes.

FAQs on Extended Deemed Reseller Rules in UK

What are deemed reseller rules?

Deemed reseller rules make an online marketplace responsible for charging and remitting VAT on certain sales. In the UK, the rules currently apply to goods sold by overseas sellers or consignments up to £135. The marketplace acts as if it bought and sold the goods, collecting VAT from the customer and passing it to HMRC.

Why is Amazon calling for the rules to be extended?

Amazon argues that the split system, where marketplaces collect VAT only for overseas sellers, has created a loophole that fraudsters exploit. Some sellers falsely claim to be UK‑established to avoid VAT, leading to an estimated £3.2 billion in untaxed sales each year. Extending the rules to all sellers would remove the incentive to misrepresent establishment status.

Would the change force small businesses below the £90 000 threshold to pay VAT?

Yes, if implemented without an exemption. A universal marketplace facilitator model would extract VAT on all marketplace sales, regardless of a seller’s turnover. Policymakers could design a carve‑out to exclude micro‑businesses, but details have not yet been proposed.

I sell on both Amazon and my own website. How would split compliance work?

You would need to keep separate VAT records. Marketplace sales would be VAT‑inclusive and collected by the platform, while direct sales would require you to charge and account for VAT if you are VAT‑registered. Good bookkeeping software and professional advice can help manage dual reporting.

Will I still need to file VAT returns if the marketplace collects VAT?

Yes. VAT‑registered sellers must continue to file returns to reclaim input VAT on their expenses. If most of your sales are through marketplaces, you may become a repayment trader – receiving VAT refunds instead of paying VAT – which can create cash‑flow issues.

What happens to sellers using the flat rate or margin schemes?

Platforms would likely collect VAT at the standard rate on marketplace sales. Sellers using special schemes would need to ‘true up’ the VAT by applying the relevant flat‑rate percentage or margin rules in their VAT return.

Are similar marketplace VAT rules used in other countries?

Yes. The United States has marketplace facilitator laws in most states. Switzerland introduced similar rules on 1 January 2025, and the EU is reviewing an extension as part of its VAT in the Digital Age reforms. These regimes show that broad marketplace VAT collection is workable, although each jurisdiction has its own thresholds and exemptions.

When might the UK implement a universal marketplace facilitator regime?

As of November 2025, the UK government is reviewing e‑commerce VAT rules. Amazon and other stakeholders hope the measure will be considered in the forthcoming Budget, but no definitive timetable has been announced. Businesses should monitor policy developments and prepare for consultation.

Posted in VAT

A Comprehensive Guide on VAT Rules For Historical Preservation Societies

Posted on by Talha Zubair

At Apex Accountants, we understand the challenges faced by preservation societies in managing historic properties. This comprehensive guide explores the VAT rules for historical preservation societies in the UK, highlighting key considerations, reliefs, and opportunities for VAT recovery that can help preservation societies manage costs effectively.

VAT Rules For Historical Preservation Societies 

The value-added tax (VAT) system is a crucial aspect of the financial management for preservation societies dealing with historic buildings. When it comes to VAT on historic and listed properties, the rules can be complex, with some specific exceptions and reliefs that can impact the cost of maintaining, repairing, and restoring such buildings.

VAT on Listed Buildings

Listed buildings in the UK are subject to the same VAT rules as other properties. However, there are specific nuances:

  • Standard VAT Rate: Most repairs and maintenance work on listed buildings attract the standard VAT rate of 20%.
  • Alterations to Listed Buildings: Approved alterations to listed buildings used to qualify for zero-rating VAT; however, this relief was withdrawn in 2012. Now, alterations generally attract the standard VAT rate of 20%, unless certain conditions apply.
  • Charitable Use and Reliefs: Buildings used for charitable purposes may benefit from some VAT exemptions or grants. For example, the Listed Places of Worship Grant Scheme provides VAT refunds on repairs for places of worship.

VAT on Historical Buildings

Historical buildings are subject to the same VAT treatment as listed buildings. While most maintenance, repair, and restoration work is taxed at the 20% VAT rate, specific conditions may allow for VAT relief:

  • Standard Rate: Repairs and maintenance of historical buildings generally attract the standard 20% VAT rate.
  • Charitable Purposes: If the historical building is used for charitable purposes (e.g., heritage sites or museums), VAT exemptions or reliefs may apply.
  • Grant Schemes: Some grant schemes, such as the Listed Places of Worship Grant Scheme, can help mitigate VAT costs on repairs for buildings used for charitable or religious purposes.

VAT on Maintenance and Repairs of Historical Buildings 

For most preservation societies, maintenance and repair work on historical and listed buildings is subject to the standard VAT rate of 20%. This can result in significant costs for renovation projects. However, there are some key exceptions where reduced VAT rates or exemptions may apply:

Exceptions and Reduced Rates

While most repair and maintenance work on historic or listed buildings is taxed at 20% VAT, some specific cases allow for reduced rates or zero-rating:

  • Conversion of Non-Residential Buildings: If a non-residential building (such as a barn, chapel, or mill) is converted into a dwelling, the work may qualify for zero-rating VAT.
  • Renovation of Empty Residential Buildings: If a residential building has been vacant for two years or more, certain renovation works may qualify for the 5% reduced VAT rate.

However, simply being a listed or historical building does not automatically mean that reduced VAT rates apply. Specific conditions must be met, and it is important to consult a VAT expert to ensure eligibility for VAT relief.

What is the standard position?

The standard VAT position for most historic and listed buildings is that repair, renovation, and maintenance works are subject to the standard VAT rate of 20%. However, there are exceptions, including:

  • Conversions: Work to convert non-residential buildings into dwellings may qualify for zero-rating VAT.
  • Renovation of Long-Term Vacant Properties: Renovation work on buildings that have been unoccupied for at least two years may qualify for the 5% reduced VAT rate.
  • Grant Schemes: Some grants, such as the Listed Places of Worship Grant Scheme, may reimburse VAT costs for certain types of work.

Implications for Historic or Listed Buildings

The main implication for historic or listed buildings is that, unless specific exceptions apply, repair and maintenance work is charged at the full 20% VAT rate. This can significantly increase the cost of preserving and maintaining these buildings.

However, there are opportunities for societies to reduce VAT costs through strategic planning and by exploring available reliefs:

  • Charitable Purposes: Buildings used for charitable activities may be eligible for specific reliefs or grant schemes.
  • Specific Conditions for Reduced VAT: Conversion or long-term vacancy may provide access to reduced rates of VAT.

Opportunities and Strategic Approaches for Preservation Societies

Preservation societies can take several strategic steps to manage VAT costs effectively:

  • Check Eligibility for Reliefs and Grants: 

The Listed Places of Worship Grant Scheme can help with VAT costs on repairs for places of worship. There may also be other local or sector-specific grants available to help mitigate VAT.

  • Use Specialist VAT Advice Early: 

Given the complexity of VAT for historical buildings, it’s essential to seek advice from a VAT expert early in the planning stages of any project.

  • Budget for VAT Costs: 

For works that are subject to VAT, ensure that your project budget accounts for the 20% VAT rate.

  • Explore Reduced-Rate VAT Opportunities: 

If the building has been vacant for a specific period (e.g., two years), certain works may qualify for a 5% reduced VAT rate.

Why Choose Apex Accountants

At Apex Accountants, we specialise in supporting preservation societies and non-profit organisations with tax and VAT issues. We understand the delicate balance between preserving historic buildings and managing financial sustainability. Our services include:

  • Expert guidance on VAT and heritage asset tax issues.
  • Clear budgeting and VAT forecasting for preservation projects.
  • Support with grant funding strategies and matching tax reliefs to your building works.

Conclusion

VAT on listed buildings and historical sites remains a significant cost consideration for preservation societies. While most repair and maintenance work attracts the standard 20% VAT rate, opportunities exist for reduced VAT rates or zero-rating under specific conditions, such as conversions or long-term vacant properties. By understanding these rules and seeking professional advice, societies can manage VAT costs and continue to preserve and protect historic buildings effectively.

For more tailored advice on managing VAT for your historic building projects, contact Apex Accountants today.

FAQs on VAT Rules For Historical Preservation Societies 

1. Does all repair work on a listed building attract 20% VAT?

Yes, most repair and maintenance work on listed or historic buildings is subject to the standard VAT rate of 20%. Exemptions may apply for certain conversions or if a property has been vacant.

2. Are there any reduced VAT rates for historic buildings?

Yes, reduced VAT rates apply in specific cases, such as converting non-residential buildings into dwellings or renovating properties that have been vacant for at least two years, qualifying for a 5% rate.

3. Can a preservation society recover VAT on building works?

Preservation societies can recover VAT on taxable supplies, but recovery is limited if they also make exempt supplies. VAT recovery depends on the nature of the building’s use and the activities conducted.

4. Is the “approved alteration” zero rate still available for listed buildings?

No, the zero-rate VAT for approved alterations to listed buildings was removed in 2012. Currently, alteration works are generally subject to the full VAT rate of 20%, unless specific conditions apply.

5. What about grant funding for VAT costs on historic buildings?

Some grant schemes, like the Listed Places of Worship Grant Scheme, help cover VAT costs for repairs on listed buildings. These grants do not cover all historic buildings, especially those not used for worship.

6. What is a “protected building” for VAT purposes?

 A “protected building” refers to a listed building or scheduled monument. VAT rules differ for these properties, particularly regarding reduced or zero-rating, which may apply to specific works or alterations under certain conditions.

7. Does charity status affect VAT treatment for historic buildings?

Yes, if a historic building is used by a charity, it may be eligible for VAT exemptions, reliefs, or rebates. These provisions apply to repairs, maintenance, and other work related to charitable use.

8. How should a preservation society budget for VAT on historic building projects?

Preservation societies should account for the standard VAT rate of 20% in project budgets. If specific reliefs or reduced rates apply, these should be identified early, particularly for eligible repairs or conversions.

9. Why does high VAT matter for heritage building projects?

High VAT costs on repairs and maintenance increase the overall financial burden on preservation societies, potentially affecting the viability of heritage projects and limiting available funds for conservation and restoration efforts.

10. Is change expected in VAT policy for historic buildings in the future?

The heritage sector is advocating for more favourable VAT treatment for historic buildings. However, no significant policy changes have been confirmed yet, and VAT rates for preservation projects remain largely unchanged at present.

What the Latest Ruling Means for VAT for Medical Staffing Agencies

Posted on by Talha Zubair

The First-tier Tribunal (FTT) delivered an important ruling in 1st Alternative Medical Staffing Ltd v HMRC [2025] TC09678. The Tribunal held that employment costs reimbursed to a medical staffing agency are fully taxable for VAT purposes. The case examined whether these costs, linked to the supply of nurses and care workers to hospitals and care homes, could fall within the VAT exemption for medical or welfare services. The ruling provides important clarification on VAT for medical staffing agencies, particularly where the agency is not subject to statutory regulation and does not deliver medical care directly. The Tribunal dismissed the agency’s argument and confirmed that VAT exemption applies only when the supplier is officially regulated and provides medical care themselves. The decision highlights HMRC’s strict approach to VAT relief in the healthcare staffing sector and reinforces how such services should be treated for VAT.

What Was the Case About?

1st Alternative Medical Staffing Ltd (AMS) supplied nurses and care assistants to NHS trusts, private hospitals, and care homes. These professionals were qualified and registered. All staff worked under the client’s direct supervision, direction, and control.

AMS invoiced its clients by splitting charges into:

– Employment Costs – covering wages, PAYE tax, and other staffing-related costs
– Commission – AMS’s own service fee

AMS charged VAT only on its commission. It treated employment costs as VAT exempt, arguing they related to exempt medical care.

HMRC’s View

HMRC disagreed with AMS’s VAT treatment. They originally planned to inspect AMS’s VAT returns but were prevented when AMS cancelled the visit.

Following correspondence, HMRC assessed that all amounts received—including reimbursed employment costs—were standard-rated for VAT. The tax authority issued VAT assessments totalling £265,590 for the relevant periods.

AMS challenged the assessments, arguing their services were VAT exempt. They also brought a judicial review, claiming HMRC acted against their “legitimate expectation”. The review failed.

AMS then appealed to the First-tier Tribunal (FTT).

Tribunal’s Decision

The Tribunal rejected the appeal. It found that AMS was not state regulated. To qualify for the VAT exemption for medical services, suppliers must meet strict conditions set out in Group 7, Schedule 9 of the VAT Act 1994. One of these conditions is regulation by a statutory health authority.

AMS was not approved, licensed, or registered by a statutory health authority. This disqualified them from relying on VAT exemption for medical care services under Note 8.

Even if the entity had been state-regulated, the services must still be “closely related” to medical care.

The Tribunal held that:

  • AMS simply supplied staff, not medical care itself.
  • The staffing function was not “indispensable” to medical treatment.
  • The services resembled those of any commercial staffing agency. 
  • Granting exemption would create unfair VAT treatment in the market

The Tribunal concluded that AMS’s services were taxable. The appeal was dismissed.

Why Does This Matter?

This ruling is a clear reminder that supplying qualified staff is not enough to secure VAT relief. Agencies operating in healthcare must meet strict exemption criteria before applying zero or exempt treatment. Many businesses in this sector now need to reassess the VAT treatment for healthcare staffing, especially when charging employment-related costs.

Applying the VAT exemption for medical services incorrectly can result in substantial VAT assessments and penalties. HMRC continues to enforce the rules strictly, and businesses must understand the legal conditions before relying on any exemption.

Reimbursed employment costs are not exempt merely because they support the delivery of medical care. If the agency does not deliver regulated medical care itself, VAT applies to the full charge. This view aligns with HMRC’s long-standing interpretation of the legislation.

Apex Accountants’ View

At Apex Accountants, we believe it’s crucial for healthcare staffing agencies to thoroughly assess their VAT treatment, especially when reimbursed employment costs are involved. Misapplying VAT exemptions could lead to costly financial consequences, including penalties from HMRC.

We recommend that all healthcare staffing agencies review their invoicing structure, contracts, and VAT treatment in light of this ruling. Our team of VAT specialists can provide tailored advice, ensuring that your agency remains compliant and avoids unnecessary tax liabilities. If you’re uncertain about your VAT position or facing an HMRC review, we can help you navigate these complex issues with confidence.

Key Takeaways for Employers and Agencies

  • VAT exemption applies only when strict legal conditions are met.
  • Being part of the healthcare delivery chain does not automatically mean exemption.
  • Staffing firms must review their VAT treatment, especially on employment costs.
  • HMRC may assess VAT on total consideration, not just service fees.
  • Cancelling a compliance check can lead to stronger scrutiny from HMRC.
  • “Legitimate expectation” arguments are unlikely to succeed if the legal framework is clear

Expert Support on VAT for Medical Staffing Agencies

At Apex Accountants, we support employment agencies, care providers, and healthcare staffing firms with all aspects of VAT compliance. Our team will assess your contracts, invoicing structure, and operational model to confirm the correct VAT treatment for healthcare staffing in line with current legislation.

If you are facing an HMRC review, unsure about your VAT position, or need to challenge a tax decision, we offer practical guidance tailored to your business model. From preventing costly errors to representing you in disputes, we are here to protect your interests.

Contact us today to get expert VAT advice that keeps your business compliant.

A Guide to VAT for Packaging Design Agencies in the UK

Posted on by Farazia Gillani

The packaging design industry sits at the intersection of creativity and commerce. From producing brand-defining visuals to coordinating printed packaging materials, agencies often work across borders and with clients from diverse sectors. This makes VAT for packaging design agencies particularly complex, especially when distinguishing between taxable services, exempt scenarios, and international supplies.

At Apex Accountants, we work closely with packaging design firms to offer clear, practical advice on VAT registration, invoicing, and compliance, complementing the kind of commercial guidance provided by the Design Business Association. Our team understands the industry’s challenges and supports better tax planning for creative agencies, helping them make confident, well-informed financial decisions.

In this article, we explain when packaging design services fall within the scope of VAT, when exemptions may apply, and how to manage international clients and mixed supplies. Whether you’re approaching the VAT threshold or already registered, this guide is designed to help you avoid costly mistakes and apply the rules correctly.

When You Must Apply VAT

  • You must register for VAT if your taxable turnover in the last 12 months exceeds £90,000.
  • If you expect your taxable turnover to exceed £90,000 in the next 30 days, you must register.
  • Once registered, you must charge VAT on standard‑rated services (normally 20%) unless the service is exempt or zero‑rated.
  • Many firms seek VAT registration for packaging design firms early to recover input VAT and establish professional credibility.

Specific Issues For Packaging Design Agencies

  • Determine the place of supply of your service. For business‑to‑business (B2B) services the place of supply is usually where the customer belongs.
  • If your client is outside the UK and the supply is B2B, the VAT may not be charged in the UK; the reverse charge might apply.
  • If your service involves providing design materials for export (for example, physical packaging sent abroad), you must check whether movement of goods or services is involved and whether zero‑rating or reliefs apply.

Understanding these rules is crucial for accurate billing and proper tax planning for creative agencies working across borders.

When Exemptions Or Special Treatments May Apply

  • Some services may be exempt from VAT; however, standard design services generally will not qualify for exemption.
  • If the service is outside the scope of UK VAT (for example, the place of supply is outside the UK), you do not charge UK VAT.
  • Even if you’re below the VAT threshold, voluntary VAT registration for packaging design firms allows you to reclaim input VAT and present a more professional image to clients.

Practical Checklist For Packaging Design Agencies

  • Monitor your taxable turnover monthly and annually
  • Establish whether the client is a business or consumer, and where they “belong”
  • On invoices clearly state your VAT registration number if registered, and show VAT separately
  • If supplying services to non‑UK clients, include details supporting place of supply outside the UK
  • If you supply packaging goods as well as design services, check whether the goods movement triggers different VAT rules

Incorrect VAT treatment can lead to penalties, incorrect pricing and lost profits. At Apex Accountants we support packaging design agencies in balancing compliance with commercial clarity.

Case Study: VAT Clarity for a Growing Packaging Design Agency

A packaging design agency based in Leeds contacted Apex Accountants after securing several international clients. Although their UK turnover remained just below the £90,000 threshold, they were unsure how to handle VAT for overseas B2B clients and whether they should register voluntarily. Their invoices lacked consistency, and they couldn’t reclaim VAT on essential tools and outsourced services.

We assessed their situation and advised them to register voluntarily for VAT so they could reclaim input VAT on UK costs. We also clarified the place of supply rules, helping them apply the reverse charge mechanism for EU clients and treat non-UK supplies correctly. With our support, they recovered over £4,700 in VAT, improved invoicing accuracy, and gained confidence in their international pricing structure.

The agency now operates with full VAT compliance, better cash flow, and a clearer financial strategy. Their creative team can focus on design while we manage the complexities behind the scenes.

What Makes Apex Accountants the Right Choice for VAT for Packaging Design Agencies

VAT compliance can be difficult for packaging design agencies, especially when dealing with international clients, digital-only services, and mixed supplies. At Apex Accountants, we combine profound sector knowledge with practical, up-to-date VAT guidance tailored to creative businesses. We help you apply the right rules, reclaim eligible costs, and avoid costly VAT errors.

Whether you’re just starting out or scaling your agency, our support gives you clarity and confidence in your VAT obligations. We take care of the complexities, from voluntary registration to invoice structure and input VAT recovery, so you can concentrate on your design work.

Contact us today to speak to a VAT expert for packaging design agencies.

Shop Owner Pleads Guilty to Duty and VAT Fraud in South Belfast

Posted on by Farazia Gillani

A shop owner based in South Belfast, operating at Blue Nile Groceries on Donegall Road, pleaded guilty to two charges relating to duty and VAT fraud.

  • On 28 July 2023, the shop owner was charged with handling 21,640 cigarettes in an attempt to defraud duty.
  • On the same date, he admitted involvement in the fraudulent evasion of VAT.
  • The defendant entered a plea of “Guilty” on both counts and will be sentenced on 14 January 2026 after a pre-sentence report.

This case highlights the serious consequences of duty and VAT fraud in the UK tobacco trade.

What Is Duty and VAT Fraud in Tobacco Trading?

Duty fraud in the UK

Under the UK law – such as the Tobacco Products Duty Act 1979 – excise duty applies to tobacco products like cigarettes, hand-rolling tobacco and other smoking products.

If goods are stored, moved or sold without the proper duty being paid or recorded, the business and individuals may commit a criminal offence.

VAT fraud in UK

Fraudulent evasion of VAT occurs when someone is knowingly involved in taking steps with a view to avoiding VAT.

In the tobacco market, this can happen when goods are disguised, duty-paid requirements ignored, or VAT rules bypassed.

Why these frauds matter

  • Revenue loss: Duty and VAT fraud drain public funds.
  • Unfair competition: Legitimate retailers face disadvantage when others trade illicitly.
  • Legal risk: Those convicted can face heavy fines, seizures or imprisonment. 

How We Help Maintain Retail and Excise Compliance in UK

At Apex Accountants, we offer support to retailers and businesses dealing in excisable goods, helping you navigate the risks of duty and VAT compliance. Our services include:

  • Compliance audit: Review your tobacco purchasing, stock and sales processes for duty, VAT, and fiscal-mark issues.
  • Record-keeping systems: Implement robust systems to track excisable goods and evidence duty has been paid.
  • Risk assessment: Identify weak spots in supply chains or trading practices that may trigger HMRC action.
  • Training & guidance: Educate owners and staff on duty/VAT obligations, what to watch for, and how to respond to enquiries.
  • Representation & advice: Provide guidance if you face an investigation or HMRC enforcement action.

Our aim is to help you trade your business legally, reduce exposure to risk, and protect your reputation.

Conclusion

The recent guilty plea by the shop owner in South Belfast underlines the serious nature of duty and VAT fraud in the tobacco sector. If your business deals with tobacco or other excisable goods, it is vital to remain compliant. Non-compliance can lead to serious customs and excise fraud cases, resulting in both financial and legal consequences.

Contact Apex Accountants to assess your obligations and build a strong compliance framework today.

FAQs on Duty and VAT Fraud in the UK

What is the difference between VAT and duty?

VAT is a tax applied to most goods and services sold in the UK. Duty is a specific tax charged on certain products such as tobacco, alcohol, and fuel. Duty is based on the type and quantity of the product, while VAT is usually a percentage of the sale price.

What triggers an HMRC investigation into tobacco duty or VAT fraud?

  • Discrepancies in stock or records.
  • Alerts from intelligence or enforcement agencies.
  • Possession or sale of tobacco products without proper duty or fiscal marks.

Is VAT fraud a criminal offence in the UK?

Yes. VAT fraud is a criminal offence. Anyone who knowingly avoids VAT or helps someone else avoid it can face prosecution. Convictions often result in heavy fines, asset seizure, and, in serious cases, imprisonment.

How serious are the penalties for duty or VAT fraud?

Penalties can be severe. HMRC may seize goods, freeze bank accounts, or issue financial penalties worth thousands of pounds. If the case goes to court, the individual may face a custodial sentence. The level of punishment depends on intent, the value of the fraud, and any previous offences.

What counts as “taking steps” towards fraudulent evasion of VAT?

This includes any action that supports the evasion of VAT. Buying, storing, or selling goods without VAT, falsifying invoices, or concealing untaxed items are all considered steps towards evasion. Even preparatory actions that show intent can be used as evidence.

Can a business avoid liability if it was unaware the goods were illicit?

Ignorance is not a guaranteed defence. If a business “suffers” its premises to be used for illicit goods and knew or ought to have known, it may be liable.

What steps should a retailer dealing in tobacco goods take to stay compliant?

  • Ensure all tobacco products carry the correct fiscal marks and duty has been properly paid. 
  • Keep clear and accurate records of purchases, sales and movements of excisable goods.
  • Be alert to suspicious suppliers or logistics routes that may raise red flags.
  • When in doubt, seek professional advice or report concerns to HM Revenue & Customs.

What is the penalty for customs or excise fraud?

Customs and excise fraud can lead to fines, seizure of goods, loss of licences, and criminal prosecution. Serious or repeated offences can result in long prison sentences. HMRC and Border Force have strong powers to investigate and confiscate illicit products.

Can you report someone for VAT fraud?

Yes. Anyone can report suspected VAT fraud to HMRC. Reports can be made online or through HMRC’s fraud hotline. You do not need evidence; suspicions based on behaviour are enough for HMRC to review.

What happens when you report someone to HMRC?

HMRC reviews the information and decides whether to open an investigation. HMRC does not disclose the identity of the person who made the report. They may check tax returns, visit the premises, request documents, or begin a formal enquiry. If wrongdoing is proven, penalties or prosecution may follow.

Can I report tax evasion anonymously?

Yes. HMRC allows anonymous reports. You do not need to give your name or contact details. You also cannot receive updates on the investigation if you choose to stay anonymous.

Is there a reward for reporting tax evasion in the UK?

HMRC sometimes gives rewards for cases involving large sums or organised crime. Rewards are not guaranteed. HMRC decides based on the value of the information and the outcome of the investigation.

How do I report VAT or duty fraud to HMRC?

You can report it online through HMRC’s tax evasion reporting service or by calling the HMRC fraud hotline. Please include as many details as possible, such as names, addresses, dates, and the manner in which the fraud is occurring.

How VAT Management for Home Security Businesses Supports Growth and Compliance

Posted on by Farazia Gillani

Home security businesses in the UK face complex VAT challenges when offering both products and services like CCTV installations and alarm monitoring. These mixed supplies often create confusion about rates, invoicing, and reporting, which can lead to compliance risks and lost savings. Effective VAT management for home security businesses solves these challenges by clarifying regulations, improving accuracy, and helping providers stay compliant while improving cash flow and overall profitability.

VAT Management for Home Security Businesses: Installations vs. Monitoring Services

VAT compliance for home security providers involves managing both installations and monitoring services:

  • Installations: The standard VAT rate of 20% typically applies to the sale and installation of security equipment. However, certain energy-saving materials may qualify for a reduced rate of 5%, depending on specific criteria.
  • Monitoring Services: Alarm monitoring services are generally exempt from VAT. This exemption can benefit customers but requires careful accounting to ensure accurate reporting and compliance.

It’s important to stay informed about any changes in VAT regulations that may affect these services.

Making Tax Digital (MTD) for VAT Compliance

As of April 2025, all VAT-related businesses, including home security providers, must comply with Making Tax Digital (MTD) requirements. MTD mandates the use of digital tools for VAT record-keeping and submission of returns to HMRC. This transition aims to reduce errors and improve efficiency in the VAT process.

By maintaining accurate digital records and strong financial controls, home security businesses can meet their MTD obligations. These practices also help them align with wider industry standards that promote accountability and trust.

Practical VAT Cash Flow Tips for Mixed Supplies

Home security businesses often deal with mixed supplies, selling both goods and services. Managing VAT for these mixed supplies can be challenging but is manageable with the right strategies:

  • Separate Invoicing: Clearly distinguish between VATable goods and exempt services on invoices to avoid confusion and ensure accurate VAT reporting.
  • Regular Reconciliation: Frequently reconcile VAT accounts to identify any discrepancies early and address them promptly.
  • Professional Advice: Consult with VAT experts to navigate complex scenarios and ensure compliance with all applicable regulations.

Implementing these practices can help maintain healthy cash flow and reduce the risk of VAT-related issues.

Recent VAT Developments Impacting Home Security Businesses

Staying updated on recent VAT changes is vital:

  • VAT Registration Threshold: The VAT registration threshold has been increased to £90,000, allowing smaller businesses to generate more revenue before they are required to register for VAT. However, discussions are ongoing about potentially raising this threshold further to £100,000, which could impact businesses’ VAT obligations.
  • Changes in VAT Regulations: The Value Added Tax (Amendment) Regulations 2025, effective from 13 June 2025, introduce adjustments that may affect various sectors, including home security. Providers should review these changes to understand their implications.
  • Capital Goods Scheme Adjustments: HMRC has announced changes to the Capital Goods Scheme, which could impact how businesses account for VAT on significant capital assets. Companies that sell home security systems and buy expensive equipment should think about how these changes will affect their VAT reporting.

Case Study: Apex Accountants Optimises VAT Management for a Home Security Provider

A home security provider faced VAT compliance issues due to the mismanagement of mixed supplies installations and monitoring services, leading to inaccurate reporting. Apex Accountants stepped in and has been helping them for years by giving them:

  • Ensuring Accurate VAT Reporting: We ensured the correct VAT rates were applied and improved invoicing, eliminating costly mistakes.
  • Seamless MTD Transition:  We transitioned them to digital accounting, streamlining VAT submissions and ensuring compliance with upcoming regulations.
  • Improving Financial Efficiency: Our experts refined VAT management, boosting financial efficiency and minimising risk.

As a result, the company is fully compliant, MTD-ready, and has smoother cash flow, allowing them to focus on growth with peace of mind.

How Apex Accountants Can Assist

At Apex Accountants, we specialise in helping firms navigate the complexities of VAT management. Our services include:

  • VAT Compliance: Ensuring your business adheres to current VAT regulations and stays updated on any changes.
  • MTD Implementation: Assisting with the transition to Making Tax Digital, including setting up compatible accounting systems.
  • Cash Flow Optimisation: Providing strategies to manage VAT on mixed supplies effectively, maintaining healthy cash flow.
  • Expert Guidance: Offering tailored advice to address specific VAT-related challenges in the home security sector.

Contact Apex Accountants today for expert assistance in managing VAT and ensuring your business remains compliant and financially efficient.

What You Need to Know About VAT Exemption for Cultural Services

Posted on by Farazia Gillani

For UK-based arts and culture organisations, the rules on VAT exemption for cultural services are very important. At Apex Accountants, we help guide cultural organisations so they comply with the law while benefiting where possible.

What the VAT Exemption For Cultural Services Cover

The VAT exemption applies to the right of admission charges for certain cultural activities. These include entry to museums, galleries, art exhibitions or zoos, and live theatrical, musical or choreographic performances of a cultural nature. However, the exemption applies only if specific conditions are satisfied.

Who Can Use It

Two main types of supplier may qualify:

  • Public bodies, such as local authorities or listed non-departmental public bodies.
  • Eligible bodies, that is, non-profit-making cultural organisations (other than public bodies), which meet defined criteria:
    • Must be non-profit-making.
    • They must apply any profits made from the relevant admission charges to the continuance or improvement of the cultural facilities or activities.
    • They must be managed and administered on a mostly voluntary basis by persons who do not have direct or indirect financial interests in the organisation.

If your organisation is for-profit, or you distribute profits to shareholders, you will not qualify as an eligible body.

What Counts as a Qualifying Supply

The eligibility for the exemption regarding cultural services specifically pertains to admission charges for attending qualifying cultural activities. It is not a blanket exemption from everything your organisation does. Qualifying supplies include admission to a museum, gallery, art exhibition or zoo, or theatrical/musical/choreographic performance of a cultural nature.

Services or goods that are closely related and incidental to that admission may also qualify. But separate commercial activities – for example, venue hire, retail sales, catering, and sponsorship packages – do not normally qualify for the exemption and will be taxable (standard rate). Clear separation in pricing and accounting is vital. 

Common Pitfalls We See

  • Assuming that you are a charity or for public benefit, all your income is VAT exempt. That is not correct. Only the qualifying admission charges may be exempt.
  • Lump-pricing admission plus add-on services (retail, catering) and treating the full price as exempt. This can invalidate the exemption and make the whole supply standard-rated.
  • Relying on eligible-body status without checking the governing documents, management structure and how profits are applied.
  • Treating livestreaming of a performance as an admission to a cultural performance without checking the facts: for example, a tribunal held that a live screening may not meet the “performance of a cultural nature” test and so may not qualify for exemption. 

Case Study: VAT Exemption for Live Screenings – Derby Quad Tribunal Decision

An insightful example of how the UK’s cultural VAT exemption is applied in practice comes from the First-Tier Tax Tribunal (November 2023) involving Derby Quad, a not-for-profit cultural hub in Derby.

Background

Derby Quad operates cinema and event spaces and holds licences to screen plays performed live in theatres. These were “near-simultaneous” satellite transmissions, with audiences watching as the performances happened elsewhere. The organisation believed its ticket sales should qualify for the cultural exemption because they offered admission to a “theatrical performance of a cultural nature”.

Tribunal Decision

The Tribunal ruled that admission to live screenings does not qualify for the cultural VAT exemption. It decided that the screenings were not theatrical performances within the natural and ordinary meaning of that term. 

The key difference was the absence of performer–audience interaction: performers could not respond to the audience, nor did the audience influence the performance. Because this live feedback loop is an essential element of theatre, the Tribunal concluded that Derby Quad’s sales were standard-rated for VAT.

Implications for Cultural Bodies

This case is relevant for arts organisations that livestream or rebroadcast performances. Many had treated income from livestreamed or near-simultaneous events as VAT-exempt during the pandemic. The ruling suggests that such supplies are likely taxable unless the audience and performers share the same physical space.

Key Takeaway

Arts and cultural organisations should review their treatment of livestreamed and broadcast events. Those that declared such income as exempt within the past four years should reassess their VAT position. 

Apex Accountants advises reviewing your contracts, ticketing arrangements, and audience interaction model to confirm the correct VAT treatment and avoid retrospective liabilities.

Practical Steps for Arts Organisations

  1. Confirm your status – check if you are a public body or qualify as an eligible body. Review your constitution, articles, profit-distribution rules, and governance.
  2. Map your income streams – separate admission income from retail, commercial hire, food & drink, and sponsorship.
  3. Structure ticketing and bundles – ensure admission is clearly priced separately if you bundle it with other items.
  4. Maintain proper records – board minutes, pricing policies, ticket terms, and accounting segregation. HMRC expects evidence.
  5. Consider input tax recovery – if you make exempt supplies, you will likely fall under partial exemption rules and may not be able to reclaim VAT on all your costs.

Why Organisations Might Choose Taxable Instead

Interestingly, in some cases, it may be preferable for an organisation to make its supply taxable rather than exempt. When a supply is exempt, input tax on associated costs cannot be reclaimed unless you fall under de minimis rules. Choosing taxable supplies could be advantageous if admissions account for the majority of your revenue and your backend expenses are high.

How Apex Accountants Can Help

At Apex Accountants, we specialise in helping arts, cultural, and creative organisations manage VAT compliance with confidence. Our team understands the fine line between exempt and taxable cultural income — from ticketed events and exhibitions to livestreaming and venue hire.

  • Eligibility reviews: we assess whether your organisation meets the HMRC “eligible body” criteria for exemption.
  • Income classification – Our experts separate exempt admissions from taxable commercial activities such as cafés, retail, and sponsorships.
  • Ticketing structure advice – We guide you on pricing, bundling, and contracts to maintain exemption where applicable.
  • Partial exemption calculations – The team helps you manage input tax recovery when both exempt and taxable supplies are made.
  • Livestreaming and digital event reviews – We advise how recent tribunal rulings, like Derby Quad (2023), affect your VAT position.
  • Documentation and audit support – Our VAT experts prepare the evidence HMRC expects, from governance details to pricing policies.

Our goal is to help cultural organisations apply the correct VAT treatments, avoid costly penalties, and maintain accurate financial reporting.

Conclusion

For arts and culture organisations in the UK wishing to apply the cultural services VAT exemption, the key is to check: 

  • you qualify as an eligible body (or public body)
  • you supply the right of admission to a qualifying cultural activity, and 
  • that you separate out any taxable commercial operations. 

At Apex Accountants we help you review your structure, ticketing model and VAT position so you can apply the exemption confidently and handle the non-exempt elements properly. If you would like help assessing your organisation’s risk or VAT exemption eligibility for cultural services, contact Apex Accountants for tailored support.

Glasgow’s Large-Scale VAT Probe Case Raises Questions About HMRC Enforcement

Posted on by Maliha Javaid

In November 2025, a large-scale VAT probe case involving Glasgow-based shop owner Mohammed Mirza concluded with an unexpected twist. 

Despite admitting to filing false VAT returns worth over £725,000 between 2011 and 2014, Mirza will not be forced to repay the money. Prosecutors dropped the confiscation order after years of court proceedings — raising critical questions for business owners across the UK. 

This case, now widely shared across finance and legal networks, has fuelled public interest around search queries like:

  • “Do convicted VAT fraudsters have to pay back money?”
  • “What happens after VAT fraud conviction?”
  • “How does HMRC recover VAT after prosecution?”

Let’s break it down and explain what this means for UK business owners in 2026.

What Actually Happened in the Mohammed Mirza VAT Repayment Case?

Mirza, aged 60, operated shops in Glasgow’s Gorbals and Cambuslang, Lanarkshire. Between December 2011 and April 2014, he submitted VAT returns that significantly understated sales. HMRC later revealed a £4 million gap between actual and declared income—resulting in £725,000 of unpaid VAT.

In 2023, he pleaded guilty to filing fraudulent VAT returns. The Crown then pursued a confiscation order under the Proceeds of Crime Act 2002 (POCA)—a legal tool used to recover financial benefits gained from crime.

But on 4 November 2025, prosecutors withdrew their confiscation motion, citing a lack of sufficient admissible evidence. This means Mirza, although convicted, will not be forced to repay the £725,000 — despite nearly £900,000 of his assets being seized and currently held by HMRC.

Apex Accountants’ View on Large-Scale VAT Probe Cases

At Apex Accountants, we view this VAT fraud conviction case as a wake-up call for business owners, especially those operating high-turnover or cash-intensive models.

This outcome doesn’t mean VAT fraud goes unpunished — but it shows that even serious cases may not result in repayment. What it does reveal is:

  • HMRC’s investigations can stretch over a decade before resolution.
  • The legal threshold for confiscation is complex and evidence-driven.
  • Even after conviction, repayment isn’t guaranteed, particularly if asset tracing or admissibility issues arise.

As forensic accountants and VAT specialists, we’ve seen how damaging a misstep in VAT compliance can be — from frozen bank accounts to damaged supplier relationships and permanent loss of trust.

Proactive record-keeping and professional representation can make the difference between resolution and escalation.

Common Issues We See in VAT Investigations

Many business owners don’t realise that HMRC can flag them and investigate:

  • Under-declared cash sales or “missing till receipts”
  • Use of fake or unverified supplier invoices
  • Incorrect VAT rates applied to goods or services
  • Reclaiming input VAT without matching sales records
  • Submitting nil returns despite ongoing operations

These red flags are often picked up by automated HMRC cross-checks or sector-specific benchmarking. Once identified, you could face not just penalties but a formal criminal investigation.

Our VAT Services and Investigation Support

At Apex Accountants, we provide end-to-end support for businesses at risk of — or already under — VAT scrutiny:

  • VAT Compliance Checks

We audit your systems and returns to ensure you meet current HMRC standards, reducing the risk of investigation.

  • Support During HMRC VAT Enquiries

From responding to letters to representing you at interviews, we guide you every step of the way.

  • Confiscation Risk Reviews

 If you’re facing prosecution or potential POCA proceedings, we assess your financial exposure and work alongside your legal team.

  • Forensic VAT & Sales Reconciliation

We review historic records, reconcile discrepancies, and build accurate accounts to help mitigate liabilities.

  • Cloud-Based VAT Filing & MTD Support

We implement and manage digital VAT software (e.g., Xero, QuickBooks) to reduce errors and keep your filings up to date.

Whether you’re a retail chain, food franchise, or property investor—if you suspect VAT irregularities or want a clear review of your position, Apex Accountants can help.

Conclusion 

The Mirza case may have ended without repayment — but most businesses won’t be so lucky. In a VAT repayment case, HMRC typically pursues every available legal route to recover lost revenue. However, outcomes can vary depending on evidence, asset availability, and prosecutorial discretion. HMRC is becoming more targeted, and the burden of proof is shifting. Now more than ever, prevention is better than cure. Speak to Apex Accountants today and take control of your VAT risks before they control your business.

Cross-Border VAT for Film Companies: Updated Guidance for UK Producers and Distributors

Posted on by Talha Zubair

What is Cross-Border VAT for Film Companies?

International film projects often involve services and sales across several countries. Each country applies its own VAT rules. UK producers must decide where a service is supplied and which country’s VAT applies.

If a UK company provides services to a non-UK business, no UK VAT is charged because the overseas client accounts for VAT under the reverse charge. However, if the same services are supplied to a private individual overseas, UK VAT still applies. Mistakes in cross-border VAT for film companies can cost thousands.

What are the VAT thresholds and registration rules?

In the UK, film companies must register for VAT once their taxable turnover exceeds £90,000 in a 12-month period. The deregistration threshold is £88,000. A business expecting to exceed the threshold within 30 days must also register.

Most film services and production activities are standard-rated at 20%. Registering for VAT allows companies to reclaim VAT on eligible costs such as equipment, studio hire, and post-production expenses.

For non-resident companies, the UK registration threshold does not apply — VAT registration is required from the first taxable transaction.

How do B2B and B2C VAT rules differ?

The place of supply determines which country’s VAT applies.

  • B2B supplies: When services are provided to a business outside the UK, no UK VAT is charged. The customer accounts for local VAT under the reverse-charge rule.
  • B2C supplies: When services are provided to a private customer, UK VAT (20%) must be charged, even if the customer is overseas.

How is VAT on international film projects applied in the UK?

VAT on international film projects depends on what’s supplied and where the client is based. Most UK production costs – such as equipment hire, location fees, and post-production – are charged at 20% VAT, with registration required once turnover exceeds £90,000.

Services supplied to non-UK businesses can often be zero-rated if the client is based overseas. For example, a UK actor billing a UK company charges VAT, but not if the company is abroad.

Film Tax Relief (FTR) and AVEC affect corporation tax, not VAT, while exports can be zero-rated with valid proof. In short, VAT applies to UK supplies but may not apply to overseas work, depending on the customer’s location and service type.

How does VAT apply to film rights and distribution?

Selling film rights or delivering a completed film counts as a supply of services.

  • If supplied to a UK business, UK VAT applies.
  • If supplied to a non-UK business, the place of supply is outside the UK, so no UK VAT is charged.

Royalties paid to overseas rights holders must be accounted for under the reverse-charge system.

What about VAT on film crew and artists?

VAT on film crew and artists applies when self-employed professionals provide services to UK-based clients. Self-employed crew and artists supplying services to UK customers must charge UK VAT. When they provide their services to productions overseas, they are not subject to UK VAT. However, performances or admissions to cultural or entertainment events are taxed where they take place.

Services connected to UK land or filming rights over public spaces are usually standard-rated at 20%. Each contract should be reviewed carefully, as HMRC may treat filming rights as taxable rather than exempt facility hire.

How does VAT for overseas shoots and post-production works?

VAT for overseas shoots can be complex, as different rules apply depending on where the work takes place. When hiring studios, equipment, or crew abroad, local VAT is usually charged. Refunds may be available if the correct registration or refund process is followed.

Taking equipment abroad may trigger import VAT unless covered by an ATA Carnet, which acts as a passport for goods. A carnet allows temporary import and export without duties or taxes and is valid for up to one year.

UK post-production services such as editing, grading, and visual effects are charged at 20%, but when supplied to non-UK businesses, they are zero-rated, as the overseas client accounts for VAT locally.

How have VAT rules changed after Brexit?

Since Brexit, the UK no longer follows EU VAT law. Services provided to EU businesses are usually zero-rated, while services supplied to EU consumers often still attract UK VAT. The key difference lies in proving whether the customer is a business or a private consumer.

What are the new EU VAT rules for digital film sales?

Since 1 January 2015, digital entertainment supplied to EU consumers — such as streaming, video-on-demand, and online film events — has been taxed in the customer’s country.

UK suppliers must charge the correct local VAT rate for each EU country. To simplify reporting, UK film companies can register under the EU Non-Union One-Stop Shop (OSS) scheme, submitting one quarterly VAT return instead of separate registrations in each country.

The former €10,000 digital threshold only applied to businesses established in the EU; non-EU suppliers (including UK businesses) must charge VAT from the first sale to EU consumers.

How should film finance and distribution firms manage VAT?

Correct management of cross-border VAT protects cash flow and avoids penalties.

Key steps:

  • Check client status: Always obtain VAT numbers and contracts from foreign business clients.
  • Apply correct rules: B2B services to overseas companies are usually zero-rated; B2C services often require UK or local VAT.
  • Use VAT schemes: Consider voluntary registration to reclaim costs. Use the OSS scheme for EU digital sales.
  • Plan overseas shoots: Research local VAT laws and use ATA Carnets for temporary exports.
  • Monitor deadlines: Keep invoices, evidence, and records ready for HMRC inspection.
  • Seek expert advice: Specialist VAT guidance helps structure deals, reclaim VAT efficiently, and prevent costly mistakes.

How can Apex Accountants help?

At Apex Accountants, we specialise in VAT for film finance, production, and distribution companies. Our services include:

  • Cross-border VAT advice for international film projects
  • Overseas VAT recovery and refund claims
  • Guidance on EU digital VAT reforms
  • OSS registration support for EU compliance
  • VAT audits and contract reviews
  • Film financing and royalty VAT planning
  • Ongoing compliance monitoring and reporting

Conclusion

Cross-border VAT affects every stage of film production and distribution. UK film companies must understand the £90,000 registration threshold, the 20% VAT rate, and the difference between B2B and B2C supply rules.

With Brexit and the EU VAT reforms, compliance is more complex than ever. By applying the correct VAT rules, maintaining clear records, using schemes like the OSS and ATA Carnets, and obtaining professional support, film businesses can reclaim eligible VAT, avoid penalties, and keep productions financially stable.

At Apex Accountants, our VAT specialists provide tailored advice for film and media companies operating across borders. We help you manage registrations, recover overseas VAT, and stay compliant with evolving HMRC and EU requirements. Book a free initial consultation today to discuss how we can support your next production.

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