5 VAT Strategies For Car Garages To Use In 2026 Posted on 9 October 20269 October 2026 by Farazia Gillani Car garages face unique challenges when it comes to managing VAT efficiently, especially as the automotive sector continues to evolve. However, with the right approach, these challenges can be effectively managed, allowing garages to improve compliance, reduce errors, and strengthen financial performance. In this blog post, we explore five key VAT strategies for car garages in 2026, helping business owners stay compliant while maintaining smooth financial operations. Value-Added-Tax Strategies For Car Garages in 2026 1. Claiming VAT on Fuel Costs Fuel is a major cost for service and repair garages. You can reclaim input VAT on road fuel if the purchase is for business use and you keep proper records. Ensure you: Keep detailed fuel purchase invoices Separate business use from private use (or apply fuel scale charges) Monitor HMRC’s rules on private use of business vehicles to avoid VAT blocks 2. Understanding VAT on Parts and Materials Garages buy many parts and materials for repair work. VAT treatment can vary depending on the part, whether it’s for resale, repair, part exchange or fitting. You should: Check whether parts are standard-rate or subject to another rate (though most remain standard at 20%) Consider whether the parts are incorporated into a vehicle you buy and then resell (which affects your ability to recover VAT) Maintain purchase and sales records clearly, linking parts cost to the job or resale, to support vehicle VAT claims and reduce risk of error. Garages that need stronger day-to-day records can use our bookkeeping services to keep purchase invoices, sales records and VAT transactions organised for accurate returns and future HMRC checks. 3. Optimising VAT Recovery on Vehicle Purchases When garages purchase vehicles for resale, inventory, or business use, the VAT rules become more complex. For example: If you buy a car that is stock in trade, you may recover VAT fully. But if a vehicle is purchased and used privately, VAT recovery is blocked. Since April 2025, special treatment affects pickup and extended cab vehicles—VAT rules remained unchanged, but other tax rules changed. For garages: ensure you identify clearly which vehicles are bought for resale or business use and maintain evidence of business use only. This supports full VAT recovery where eligible. 4. Managing VAT on International Transactions If your garage imports parts, exports vehicles, or deals with overseas suppliers/customers, VAT gets more complex: Goods imported into the UK from abroad attract import VAT, which may be recoverable if you are VAT-registered and use the goods in business. If you export a vehicle outside the UK, the sale may be zero-rated, subject to conditions. Brexit changed rules: EU → UK trade no longer has the same distance selling thresholds and has its own UK registration and fulfilment obligations. Garages dealing cross-border must keep good records of import VAT paid, export documentation, and VAT invoices. These reduce the risk of errors and allow the claim of any recoverable VAT. Get Free Consultation Call Anytime 0203 883 4777 Get Free Consultation 5. Utilising VAT Schemes and Special Provisions There are VAT schemes that may benefit garages: The VAT Margin Scheme for second-hand vehicles allows eligible garages to account for VAT on the margin rather than the full selling price. Worked Example: VAT Margin Scheme Calculation A UK motor garage purchases a second-hand car for £6,000 and resells it for £8,500 after £500 in repair work. Under the standard VAT scheme, VAT on the £8,500 sale price would be £1,416.67. Under the HMRC Second-Hand Margin Scheme, VAT is calculated only on the £2,500 gross margin (£8,500 sales price minus £6,000 purchase price), resulting in £416.67 VAT due (£2,500 x 1/6). Applying the margin scheme saves the garage £1,000 in output VAT. The Flat Rate Scheme may help smaller garages manage simpler VAT accounting (though you may lose some input tax recovery). For secondhand motor vehicle trade, special payment schemes apply for VAT handling. A garage should assess whether these schemes suit its business model, especially around resale of used vehicles or part-exchange. Using the correct scheme can reduce VAT complexity and improve margin. Why These Strategies Matter By applying the five strategies above, garages can: Boost VAT recovery where permissible Reduce risk of VAT errors and HMRC enquiries Improve cash-flow by reclaiming VAT on allowable costs Choose the correct VAT method for vehicle purchases and sales As a garage grows, managing VAT alongside payroll, bookkeeping and financial reporting can become more time-consuming. Our outsourced accounting services can give owners ongoing financial support while keeping VAT and accounting processes coordinated. How Apex Accountants’ VAT Strategies for Car Garages Can Help You At Apex Accountants, we specialise in helping car garages handle VAT efficiently and remain fully compliant with HMRC regulations. Our qualified tax and accounting experts work with garages of all sizes to manage complex VAT issues — from reclaiming input tax on fuel and vehicle purchases to choosing the right VAT scheme for your operations. VAT should also reconcile with the wider financial records used to prepare your annual accounts, helping identify inconsistencies between sales, purchases, stock and VAT reporting before they create larger compliance problems. Here’s how we can help: VAT Consultancy: We assess your current VAT setup and identify opportunities to improve accuracy and reclaim eligible input VAT. VAT Registration & Returns: We manage timely VAT registrations and accurate digital submissions under Making Tax Digital (MTD) requirements. Fuel & Vehicle VAT Claims: Our team sets up structured systems to record and reclaim VAT on fuel, repairs, and business vehicle purchases. Cross-Border VAT Compliance: If your garage imports parts or exports vehicles, we handle VAT on international transactions to keep your operations compliant. VAT Scheme Review: We advise on the suitability of the Flat Rate or Margin Scheme for second-hand vehicles to improve cost-efficiency. HMRC Audit Support: We assist during VAT inspections or investigations, providing documentation and expert representation when needed. With our proactive guidance, garages can avoid penalties, reclaim eligible VAT faster, and simplify their accounting processes. When you partner with Apex Accountants, you are entrusting your VAT management to specialists who have a deep understanding of the automotive sector. Get Free Consultation Call Anytime 0203 883 4777 Get Free Consultation FAQs How can car garages claim VAT on fuel costs? Keep detailed fuel invoices, track business vs private use, and apply fuel scale charges or records. When can VAT be reclaimed on a car purchase? Only when the vehicle is bought for resale or business use exclusively; private use blocks recovery. Is VAT charged on MOT testing fees in UK garages? No. The statutory MOT test fee, currently up to £54.85 for a car, is not subject to VAT where the relevant conditions are met. The garage normally charges standard-rate VAT on repair work, replacement parts, and additional taxable services. How has Brexit affected VAT for international vehicle trade? The UK is no longer subject to EU distance selling thresholds; import/export VAT rules differ, and you may need to register. How Does the VAT Margin Scheme Work for Car Garages Selling Second-Hand Vehicles? The VAT Margin Scheme allows eligible garages to account for VAT at one-sixth of the qualifying margin between the vehicle’s purchase price and selling price, rather than accounting for VAT on the full selling price. The scheme is subject to specific eligibility and record-keeping requirements. Can small garages use the Flat Rate Scheme? Yes, if eligible, the scheme simplifies VAT accounting, though you must weigh input tax recovery loss. What happens if an employee uses a business vehicle for private use? You may have to account for output tax or block some input tax recovery. Can a Garage Reclaim VAT on Tools, Equipment and Garage Machinery? Generally, yes. A VAT-registered garage can normally reclaim input VAT on tools, vehicle lifts, diagnostic equipment and other purchases used for its taxable business activities, provided the normal VAT recovery conditions are met and valid VAT invoices are retained. Recovery may be restricted where there is private use, exempt activity or another specific VAT restriction. How should a garage handle VAT on part-exchange vehicles? Document the cost, margin, and VAT treatment, whether the margin scheme applies or not. Good recordkeeping is critical. What are common VAT mistakes by garages Treating private use as business use, incomplete fuel records, applying the wrong VAT rate on sales, misuse of the margin scheme. Feel free to Book a free consultation with us today for VAT Strategies For Car Garages!
A Practical Guide to VAT for Advertising Design Companies in the UK Posted on 8 October 20269 October 2026 by Farazia Gillani Understanding VAT for advertising design companies is essential for ensuring tax compliance and maximising your business’s financial efficiency. As a VAT-registered advertising design agency in the UK, you need to know when and how to charge VAT on your services, reclaim VAT on business-related expenses, and handle VAT-inclusive pricing for consumers. One common question that businesses have is, do advertised prices have to include VAT? The answer is yes if you’re VAT-registered and the price is for consumers. For B2B, prices can exclude VAT, but you must clearly state VAT will be added. At Apex Accountants, we offer expert guidance tailored to the specific needs of creative agencies, helping you navigate the complexities of VAT and tax regulations to keep your operations compliant and tax-efficient. When Must You Charge VAT on Your Services? Standard VAT Rules for Agencies Advertising and design services, including packaging design agencies, are generally subject to VAT at the standard rate of 20%. If your business is VAT-registered and your client is based in the UK, you must add VAT to your invoices. According to HMRC’s place-of-supply rules, design and advertising services are considered intangible services. Therefore, if you are supplying services to UK customers, VAT is due at the standard rate. VAT on Services to Overseas Customers For business-to-business (B2B) transactions, the place of supply is where the customer is located. If your client is outside the UK, your invoice will generally be outside the scope of UK VAT. However, if you are providing services to a business-to-consumer (B2C) client, UK VAT will still apply, as the place of supply remains in the UK. Place of supply of services (VAT Notice 741A). VAT on Cross-Border Digital Services and the Reverse Charge When purchasing advertising services from non-UK suppliers like Google or Facebook, the reverse-charge mechanism may apply. This means your business accounts for both output VAT and input VAT on its VAT return. By doing so, you can reclaim the VAT in the same return, ensuring full compliance with HMRC rules while facilitating the correct declaration of VAT on cross-border digital advertising. Do Advertised Prices Have to Include VAT? The inclusion of VAT in advertised prices depends on your target audience: For Consumer Clients (B2C): If your customers are consumers, all prices in advertisements must include VAT. It’s not enough to quote a VAT-exclusive price and later mention that VAT will be added. The price must be clear, showing the VAT-inclusive amount. For Business Clients (B2B): You may quote VAT-exclusive prices as long as it’s clear that the price applies only to VAT-registered businesses. It’s best practice to display the price with the VAT rate (e.g., “£120 + VAT @ 20%”). For Mixed Audiences: If your target audience includes both consumers and businesses, you should show both VAT-inclusive and VAT-exclusive prices. Clearly label VAT-exclusive prices as trade prices and include the VAT rate. The VAT-inclusive price must be shown with at least equal prominence to the VAT-exclusive price. Complying with these rules ensures your advertisements are not misleading and helps you avoid complaints from the Advertising Standards Authority (ASA). Get Free Consultation Call Anytime 0203 883 4777 Get Free Consultation Deducting Advertising and Marketing Costs The “Wholly and Exclusively” Rule To qualify for a tax deduction, advertising expenses must be incurred wholly and exclusively for the purposes of the business. This means that costs must directly contribute to promoting your agency and must not have any personal benefit. For example, advertising expenses such as printing, online advertising, or campaign costs are generally deductible, while personal hospitality costs are not. Advertising vs. Entertainment It’s important to distinguish between advertising expenses and entertainment costs. Advertising costs, such as promoting your services through campaigns or online ads, are deductible, but client entertainment (e.g., concerts, meals, gifts) is not. According to HMRC, hospitality or entertainment expenses are generally not allowed unless they are minimal or incidental. Practical Examples of Deductible Costs Promotional Events: If you host an event to showcase your agency’s work, the venue hire costs may be deductible, provided the event’s primary purpose is to advertise your business. Free Samples: The cost of giving away goods or services for marketing purposes is generally deductible. For example, providing free samples at a trade fair or gifting products to influencers for promotional purposes are allowable costs. VAT Reclaim for Advertising Companies As a VAT-registered design or advertising agency, you can reclaim VAT on purchases that are used for your business. This includes VAT on business-related purchases such as software, print services, and marketing materials. If an item is partly for personal use, only the business portion of VAT is recoverable. Practical Examples of VAT Reclaim If your agency purchases printing services to produce marketing materials, the VAT on those services can be reclaimed. If your business buys software subscriptions for design tools and also uses them for personal projects, you must apportion the VAT and only reclaim the portion used for business purposes. VAT and Research & Development (R&D) Relief Many advertising and design agencies engage in innovation, such as creating new software or digital tools to streamline creative processes. If these projects meet HMRC’s criteria for Research and Development (R&D) tax relief, you could be eligible for tax credits or enhanced deductions on qualifying expenses, including software and staff costs. At Apex Accountants, we can help assess whether your projects qualify for R&D tax relief, ensuring you claim all available benefits while remaining compliant. How Apex Accountants Can Help with VAT for Advertising Design Companies Identify deductible costs: We help you separate deductible advertising expenses from non-deductible entertainment costs to ensure you claim the correct deductions. VAT compliance: Our team provides advice on when to charge VAT, how to display VAT in your ads, and how to handle cross-border services. We also guide you on reclaiming VAT on purchases. Record keeping: With our digital record-keeping systems that comply with Making Tax Digital (MTD), we ensure your invoices, receipts, and campaign analytics are securely stored and ready for HMRC review. Strategic planning: Our experts plan ahead to help reduce your overall tax liability, explore R&D tax relief, and ensure ongoing compliance with HMRC rules. Get Free Consultation Call Anytime 0203 883 4777 Get Free Consultation Conclusion Navigating VAT for your advertising design business is essential for ensuring compliance and maximising financial efficiency. From understanding when to charge VAT, to reclaiming VAT on business-related purchases, it’s important to get the details right. If you need guidance on VAT reclaim for advertising companies or have questions about VAT compliance, Apex Accountants is here to help. Our expert team is ready to assist with everything, including VAT reporting to strategic planning, accounting and record-keeping, ensuring your business remains tax-efficient and compliant with HMRC’s rules. Contact Apex Accountants today to receive personalised support and keep your business on track with VAT requirements. Frequently Asked Questions Do you charge VAT on advertising services? Yes. Advertising and design services supplied in the UK are standard-rated at 20%. A VAT-registered client can usually reclaim that VAT as input tax where the advertising relates to its taxable supplies, so the cost is typically neutral for registered businesses. Can an advertising or design agency reclaim VAT on its costs? Yes, in the normal way: a VAT-registered agency reclaims input VAT on business costs and charges VAT on its fees. Where the agency also makes exempt supplies, the partial exemption rules limit how much input VAT is recoverable. Is VAT on advertising different for charities? Yes. Adverts placed by charities can qualify for zero-rating under the charity advertising relief, a specific exception that does not apply to commercial advertisers; the relief has strict conditions on the type of advertisement and the charity’s status.
Zero-Rated VAT for Books in the UK: Tribunal Backs Publisher in Ghost-Written Book Dispute Posted on 8 October 20269 October 2026 by Farazia Gillani A UK tax tribunal decision in Story Terrace Limited v HMRC [2025] UKFTT 01554 (TC), issued on 11 December 2025, clarified how VAT applies to certain personalised publishing services. The case considered whether a company supplying autobiographical books created with professional ghostwriters was making a zero-rated supply of books or a standard-rated supply of writing services. The tribunal allowed the company’s appeal, finding that the supply was one of books rather than a separate standard-rated ghostwriting service. The decision highlights the importance of examining the complete transaction, the customer’s objective and the relationship between the creative work and the finished publication. It does not mean that every package involving writing and printing automatically qualifies for zero-rating. Key Points A UK tax tribunal ruled that the personalised publishing supplies in the Story Terrace case qualified for VAT zero-rating. The tribunal considered whether the company supplied books or ghostwriting services. The decision focused on the nature of the overall supply and what customers were purchasing. Writing, research and design can form part of a wider transaction, but their VAT treatment depends on the specific circumstances. Businesses should assess their contracts, products and actual commercial arrangements before applying zero-rating. What Has Happened? The case involved a UK company producing personalised autobiographical books. Customers shared their life stories through interviews and questionnaires, which professional writers used to develop a finished publication. The service included several stages: Interview sessions with a ghostwriter Drafting and editing the narrative Including photographs supplied by the customer Designing and formatting the book Printing physical copies and providing a digital version HMRC argued that the company was supplying standard-rated ghostwriting services. The company maintained that customers were principally purchasing finished books, with the writing and related work forming part of the process of producing them. The tribunal upheld the appeal and found that the supplies were zero-rated supplies of books. The judgment illustrates why businesses should assess the transaction as a whole instead of automatically treating each activity involved in producing a publication as a separate supply. Get Free Consultation Call Anytime 0203 883 4777 Get Free Consultation Understanding the Background of Zero-Rated VAT for Books in the UK Under UK VAT rules, qualifying books and certain other printed publications are zero-rated. A 0% VAT rate is different from exemption: zero-rated supplies remain taxable supplies, and VAT-registered businesses can generally reclaim eligible input VAT, subject to the normal rules. HMRC explains the rules in its VAT Notice 701/10. The notice was last updated on 31 July 2020 and remains the official guidance for assessing whether books and other printed matter qualify for zero-rating. It also covers certain electronic publications. However, VAT treatment can become more complicated when a transaction combines physical goods and services, such as a printed book with writing, editing or design work. In these situations, businesses may need to determine whether they are making a single supply or multiple supplies. HMRC guidance explains that the assessment can involve considering whether one element is the principal supply and the other elements are ancillary, or whether the components are distinct and independent. VAT on Printed Items: Which Products Qualify for Zero-Rating? The VAT treatment of VAT on printed items depends on the type of publication and whether it meets the relevant conditions. Qualifying books, booklets, brochures, pamphlets, leaflets, newspapers, periodicals, printed music and certain maps can be zero-rated. However, not every item made from paper or card qualifies. Businesses unsure which VAT rate applies to their products can consult the GOV.UK guide to VAT rates on different goods and services for further guidance. For example, HMRC generally treats posters, greetings cards, diaries sold unused, address books and many stationery products as standard-rated. Some products that look similar may receive different VAT treatment because of their purpose, format or content. Certain electronic books and other eligible electronic publications can also qualify for zero-rating under the rules introduced from 1 May 2020. However, publications devoted wholly or predominantly to advertising, or consisting wholly or predominantly of audio or video content, are excluded from that relief. Businesses should check the relevant category in HMRC guidance before applying a zero rate. The Story Terrace decision is especially relevant when a business combines creative work with a finished printed publication, because the relationship between the services and the final product can affect the VAT classification. Key Rules and Legal Considerations When assessing a transaction involving goods and services, businesses should consider several factors. 1. The principal element of the supply The assessment considers the transaction from the customer’s perspective and whether one element is the principal supply. In the Story Terrace case, the tribunal found that the supply was of books rather than a separate writing service. 2. The commercial reality of the transaction Businesses should consider what they actually agree to provide and what the customer receives. The description used on an invoice is relevant to the records, but it does not by itself settle the VAT treatment. 3. Contractual documentation Contracts, quotations and customer agreements can help demonstrate the nature of the supply. Businesses should make sure their documentation reflects the actual arrangement. 4. Additional or ancillary services Writing, research, editing and design may form part of a wider supply. However, services provided independently may receive different VAT treatment from services forming part of a qualifying supply of books. The tribunal’s decision should be applied carefully. A business supplying a printed book alongside separate, independently available services may need to assess whether it is making one supply or multiple supplies. The answer depends on the facts and the applicable VAT rules. Who Is Affected by the Tribunal Decision? The ruling may be relevant to businesses whose products combine creative work with printed publications, including: Personalised publishing businesses Ghostwriting and biography services Memoir publishing companies Specialist print-on-demand providers Businesses producing bespoke printed publications Companies creating corporate histories or commemorative books Businesses in these sectors should review their own arrangements rather than assuming that the tribunal’s decision guarantees zero-rating for all similar products. The nature of the service, contractual terms and the customer’s overall purchase remain important. Why This Matters for UK Businesses VAT classification can affect pricing, cash flow and profitability. Standard-rated supplies are generally subject to VAT at 20%, whereas qualifying zero-rated supplies carry a 0% rate. The correct classification can therefore affect the amount charged to customers and the VAT a business accounts for. Incorrectly applying zero-rating may lead to additional VAT liabilities, interest, penalties and disputes with customers. Businesses should assess their products and services carefully before deciding how to account for VAT. A tribunal decision can help explain how VAT principles apply to a particular arrangement, but it should not be treated as a blanket rule for every publishing business. Businesses should consider the facts of their own supplies and the relevant HMRC guidance. Is there VAT on books in the UK? Most qualifying books in the UK are zero-rated rather than exempt from VAT. This means the VAT rate on eligible book sales is 0%, not that the supplies fall outside the VAT system. VAT-registered businesses can generally reclaim eligible input VAT relating to these sales, subject to the normal conditions. However, the treatment depends on the publication and the circumstances in which it is supplied. For example, some products that resemble books are classified as stationery or other standard-rated items under HMRC guidance. Where a book is supplied as part of a package involving ghostwriting, editing, design or other services, the business should assess whether the transaction is a single supply or multiple supplies. The Story Terrace decision provides an example of a tribunal finding that the overall supply qualified as a zero-rated supply of books, but other arrangements may have a different outcome. Get Free Consultation Call Anytime 0203 883 4777 Get Free Consultation What Businesses Should Do Businesses that supply books or combine creative services with printed products should review their VAT position carefully. Recommended actions include: Reviewing contracts and customer agreements. Identifying the main purpose and nature of the transaction. Assessing whether additional services are ancillary or independent. Checking the relevant HMRC guidance. Keeping records that support the chosen VAT treatment. Seeking professional advice where the classification is unclear. Businesses should also check whether their products fall within a specific category listed in HMRC guidance. Do not assume that a product qualifies for zero-rating simply because it is printed or contains written material. VAT Notice 701/10: Guidance on Books and Printed Matter VAT Notice 701/10: Books and printed matter is HMRC’s official guidance on the circumstances in which books and other printed matter can qualify for zero-rating. It covers qualifying formats, categories of printed products, related supplies and the distinction between single and multiple supplies. Businesses can use the notice to check how the rules apply to their publications. Where a transaction includes writing, design, research or other services, the notice should be considered alongside the facts of the arrangement and the principles applied in relevant tribunal decisions. If the correct classification remains uncertain, businesses may benefit from professional VAT advice before applying zero-rating. How Apex Accountants Can Help with VAT Treatment for Publishing and Creative Services Determining the correct VAT treatment for personalised or ghost-written books can be challenging. Apex Accountants & Tax Advisors supports businesses in reviewing the VAT classification of products and services, particularly where transactions combine physical goods with creative work. Support may include reviewing contracts, assessing mixed supplies, conducting VAT compliance checks and assisting businesses with HMRC enquiries or disputes. Businesses can also consult the firm’s guide to VAT returns in the UK for information about reporting VAT. Businesses involved in publishing, content creation or customised products can contact Apex Accountants to discuss their VAT position and obtain advice based on their specific circumstances. Conclusion The Story Terrace Limited v HMRC decision, issued on 11 December 2025, highlights how the nature of a transaction can determine whether a supply involving creative work and a finished book qualifies for zero-rating. In this case, the tribunal found that the supply was of books rather than a standard-rated ghostwriting service. Businesses involved in publishing should review their contracts, understand the nature of their supplies and consult HMRC guidance when deciding whether zero-rating applies. The outcome of this case should not be applied automatically to every package involving books and creative services. Get Free Consultation Call Anytime 0203 883 4777 Get Free Consultation Frequently Asked Questions Is there VAT on books? Most qualifying books in the UK are zero-rated at 0%, rather than exempt from VAT. However, some printed products are standard-rated. Are books zero-rated for VAT in the UK? Most qualifying books are zero-rated for VAT. Businesses should check the relevant HMRC rules to confirm whether a particular publication qualifies. Do ghostwriting services attract VAT? Ghostwriting services supplied independently are generally standard-rated at 20%. Where writing forms part of a wider transaction involving a finished book, the VAT treatment may differ depending on the circumstances. What is a single supply for VAT purposes? A single supply occurs when different elements form one overall transaction for VAT purposes. Whether a transaction qualifies as a single supply depends on the relationship between its elements and the applicable legal principles. How does HMRC decide the VAT treatment of mixed supplies? The assessment may consider the commercial reality of the transaction, the customer’s main objective, the contractual terms and whether the elements form one supply or separate supplies. Does HMRC guidance determine VAT law? HMRC guidance explains the department’s interpretation and application of VAT rules. The legal position ultimately depends on the relevant legislation and case law. Can VAT disputes be appealed? Businesses may be able to appeal certain HMRC VAT decisions to the First-tier Tribunal (Tax Chamber), subject to the relevant procedures and time limits. Are books zero-rated or exempt from VAT? Most qualifying printed books are zero-rated, not exempt. Zero-rated supplies carry a 0% VAT rate, while exempt supplies have different rules, including different treatment of input VAT recovery. What falls under zero-rated VAT in the UK? Examples include qualifying books and certain other printed matter, such as eligible brochures, leaflets, newspapers and periodicals. The precise treatment depends on the product and the relevant conditions. Does zero-rated mean there is no VAT? Zero-rated supplies remain within the VAT system but carry a 0% rate. VAT-registered businesses must account for them appropriately and may recover eligible input VAT, subject to the normal rules. What are examples of zero-rated items? Examples include qualifying printed books and certain other printed matter, along with other categories specified in UK VAT legislation. Businesses should consult the relevant HMRC guidance to confirm the treatment of a particular item.
Understanding VAT on Holiday Lets: The £90,000 Question for Landlords Posted on 7 October 20267 October 2026 by Farazia Gillani You do not need to register for VAT on holiday lets until your taxable turnover from the properties passes £90,000 in a rolling 12-month period, or you expect it to pass £90,000 in the next 30 days alone. Below the threshold, no registration and no VAT on your bookings apply. Once you cross it, holiday letting income carries the 20% standard rate, not the exemption that saves long-term residential landlords, and you must register within 30 days. That difference between “taxable” and “exempt” catches thousands of UK holiday let owners out every year, and the end of the furnished holiday let (FHL) tax regime in April 2025 changed none of it. Key Takeaways Holiday letting income counts as a taxable supply for VAT purposes. Long-term residential letting is an exempt supply and does not. The £90,000 registration threshold only measures taxable turnover. The two tests: more than £90,000 of taxable turnover in the previous 12 months (rolling), or expected turnover above £90,000 in the next 30 days alone. Once registered, you add 20% VAT to holiday let bookings. The Flat Rate Scheme charges most holiday let owners 10.5% of VAT‑inclusive turnover instead (9.5% in the first year of VAT registration). The April 2025 FHL abolition changed income tax and capital gains rules only. The VAT position of holiday lets stays exactly as it was. Missing a compulsory registration date means backdated output tax on every booking plus a failure‑to‑notify penalty, so the trigger dates matter more than anything else. How VAT on Holiday Lets Works: Taxable, Not Exempt The starting point decides everything: what type of supply does your property income represent? The rules for VAT on holiday lettings follow the character of the letting, not the type of property. A long-term residential letting falls within the VAT exemption for land. A holiday let does not, because letting holiday accommodation counts as the provision of accommodation in the same way a hotel or guesthouse provides it. HMRC treats short-stay, self-catering holiday accommodation as a standard-rated supply under VAT Notice 709/3. If you let a cottage by the night or the week on Airbnb, Booking.com or directly to guests, that income belongs in the taxable column, and the holiday let VAT rate applies at 20% once you register. This taxable-versus-exempt split has two consequences worth flagging early. First, exempt residential let income never counts toward the £90,000 threshold, but taxable holiday let income always does. A landlord with £70,000 of long-let rent stays out of the net; a landlord with £70,000 of peak-season holiday bookings sits £20,000 below it and needs to watch the running total. Second, if you register for VAT because of your holiday let business, you must charge VAT on your taxable supplies, but the exempt supplies simply stay exempt. Registration does not drag your residential portfolio into the VAT net; it just sits alongside it under partial exemption rules. When Does the £90,000 Threshold Force You to Register? Two separate tests govern the VAT registration threshold for holiday let owners, and you must act on whichever one bites first. Test 1: the rolling 12‑month test. Add up your taxable turnover on a rolling basis. At the end of any month, if the cumulative total for the previous 12 months first exceeds £90,000, you must notify HMRC within 30 days of the end of that month. Your effective date of registration is the first day of the second month after you go over. Most single‑property owners never come close, because a cottage grossing £34,000 a season stays well under. Portfolio owners cross it quietly, which is exactly why HMRC now receives booking data from the major platforms. Test 2: the 30‑day forward test. If at any point you expect taxable turnover above £90,000 in the next 30 days alone, a one‑off spike pushes you over. This test catches owners who sell a holiday park or sign a large corporate booking block. You must register by the end of that 30‑day period, and your effective date of registration is the date you realised you would exceed the threshold, not when the income lands. What counts toward the total. Gross booking income, including cleaning fees, linen charges and cancellation deposits you keep as part‑payment for the letting. Platform commissions do not reduce the total; the VATable amount equals what the guest pays, not what reaches your bank after Airbnb or Booking.com deduct their fees. Our UK Airbnb tax guide covers how platform reporting interacts with your obligations. A Worked Example: Three Cottages Approaching the Line Numbers make the tests concrete. Suppose you own three holiday cottages with these takings. Cottage A, Cornwall: £38,500 for the year Cottage B, Northumberland: £31,000 for the year Cottage C, Peak District: £29,500 for the year The portfolio totals £99,000 of taxable turnover, so the threshold falls during the season, not at year end. If the rolling 12-month total first passed £90,000 on 31 August, your compulsory registration date lands 30 days later, at the start of October. From that date forward, every booking carries 20% output VAT, and the quarterly return counts output tax on bookings taken, not just income banked. Two practical notes follow from the arithmetic. Bookings taken before the registration date but paid after it generally stay outside the scope of your first return, because the supply date normally falls when the booking completes. And a spike year does not offer a grace exit: once registered, you stay registered until taxable turnover falls below the £88,000 deregistration threshold on the same rolling basis. Get Free Consultation Call Anytime 0203 883 4777 Get Free Consultation What Rate Do You Charge Once Registered? The headline answer: 20% on the letting of the property, plus any extras you supply as part of the stay, such as welcome hampers, mid-stay cleaning or bike hire.Understanding the holiday let VAT rate before registration also helps landlords decide whether to absorb VAT within existing prices or increase the amount charged to guests. The Flat Rate Scheme offers a simpler route for most single‑site and small‑portfolio owners. The scheme applies a flat 10.5% to your VAT‑inclusive turnover for “hotel or accommodation” businesses, instead of 20% output tax minus input tax on your costs. In your first 12 months as a VAT‑registered business you get a 1% discount, so the rate is effectively 9.5% for that year. A £120,000 VAT‑inclusive year means a flat‑rate payment of £12,600 (or £11,400 in year one) rather than tracking receipts for towels, utilities and agent fees. Two traps apply. The limited‑cost rule lifts your rate to 16.5% if your VAT‑inclusive spend on relevant goods is under 2% of turnover or under £1,000 a year, which catches some self‑catering owners whose costs run mainly to services. And the scheme changes your cash result, sometimes for the better and sometimes not: our holiday home VAT planning guide walks through the comparison. Pricing strategy deserves a decision before registration day, not after. You either absorb the VAT inside your existing headline prices and take a real-terms income cut, or you gross up and let guests pay the difference. Peak-season properties with strong demand pass the cost along easily; price-sensitive off-season breaks often cannot. Did the Furnished Holiday Let Abolition Change VAT? No. The FHL regime ended on 6 April 2025 for individuals and on 1 April 2025 for companies, and it changed income tax reliefs, loss rules and capital gains treatment. It left the VAT rules untouched, because the taxable status of holiday accommodation never depended on FHL qualification in the first place. VAT on furnished holiday lets follows the accommodation rules, not the income tax regime. Owners sometimes assume the abolition quietly returned their cottages to the exempt land category; it did not, and HMRC’s enforcement posture now leans on platform data more heavily than ever, as we explain in our guide to HMRC’s data-led tax audits. Platform reporting mismatches now appear among the common triggers for HMRC tax investigations, which matters for any owner whose booking data and tax returns disagree. Off-Season Lets, Deposits and Cancellations One nuance survives from the old guidance. If you let the property outside its normal holiday season, and at that time of year nobody markets it as holiday accommodation, the letting can fall into the exempt land category. An owner who lets a coastal cottage on a six-month winter residential basis typically makes an exempt supply for that period; the same cottage let by the week in August makes a taxable one. The line follows the character of the letting and the season, not a form you file. Strategic use of the off-season exemption legitimately keeps part of your year outside the taxable total. Deposits split into two treatments. A deposit that forms part-payment for a stay simply represents VAT on the booking, so it counts when the supply occurs. A deposit you keep after a guest cancels, as compensation rather than consideration for accommodation, generally falls outside the scope of VAT because no supply happened. Keep the paperwork clear: cancellation terms that describe a genuine damages payment protect you here far better than vague “non-refundable” wording. What Happens If You Do Not Register When You Should? The exposure runs in three layers. Backdated output tax. HMRC assesses the 20% that should have appeared on your bookings, calculated on your gross income, with interest from the original due dates. Failure-to-notify penalty. The penalty scales with the tax at stake and the reason for the delay: 0% for an unprompted tell-us-first disclosure, rising to 100% or more of the lost tax for deliberate concealment. No input credit. Until you register, you cannot recover the VAT on your refurbishment and running costs, which quietly grows into a real sum during a fit-out year. Booking platforms share host data with HMRC under international reporting arrangements, so the discovery risk for larger portfolios continues to rise. If you suspect you crossed the line in a past period, a voluntary disclosure before HMRC contacts you caps the penalty at the minimum band. Our team provides comprehensive support for HMRC VAT investigations and dispute resolution, and the case for specialist help before you disclose is set out here. What Landlords Should Do Now A reactive approach to VAT often leads to errors, penalties, and cash flow pressure. A more structured approach helps reduce risk and keeps reporting clean. For landlords managing VAT on holiday lettings, regular turnover checks and accurate records can help identify registration obligations before they become a compliance issue. Key actions include: Monitor Turnover and Register at the Right Time Track your taxable turnover on a rolling 12-month basis, not just by tax year. This report should include: The VAT registration threshold for holiday let owners should therefore be monitored throughout the year rather than reviewed only when annual accounts are prepared. All income from holiday lets Any other taxable business activities Once you approach the £90,000 threshold, take action early. Late registration can result in: Backdated VAT liabilities Interest and penalties Reduced profit margins if VAT was not factored into pricing Review How Your Business Is Structured Splitting properties across different names or entities does not automatically reduce VAT exposure. HMRC looks at the substance of the arrangement. Businesses can connect through: Shared finances Common control Integrated operations they may be treated as a single company under VAT. This means: Turnover is combined VAT registration may be required earlier Past periods can be reviewed Structure decisions should be based on commercial reality, not just tax outcomes. A considered approach across these areas can prevent costly corrections later and keep your holiday letting activity compliant and predictable. Review VAT You Can Reclaim Once registered, review the VAT incurred on eligible holiday-let costs, including furnishings, maintenance and other business expenses. VAT on some costs incurred before registration may also be recoverable, subject to HMRC’s conditions, time limits and evidence requirements. FAQ Do I Pay VAT on Every Holiday Let Booking Once Registered? Yes, at 20%, on the letting and the extras you supply as part of the stay. Guests see the tax as part of the price, and you account for it on your VAT return. Bookings taken before your registration date stay outside the first return. Does Airbnb or Booking.com Income Count Toward the £90,000 Threshold? Yes, in full, measured on what the guest pays before platform commissions. The platforms deduct their fees from your payout, but the VATable value of the supply stays the gross booking price. Both platforms report host data to tax authorities, so under-declaring carries real discovery risk. Can I Use the Flat Rate Scheme for My Holiday Let? Usually, yes. The “hotel or accommodation” category charges 10.5% of VAT-inclusive turnover, with a 1% discount in your first year of registration. Check the limited-cost test first: if your goods spend runs below 2% of turnover, the 16.5% rate applies instead and the scheme stops paying. Is My Long-Term Residential Letting Income Included? No. Exempt supplies never count toward the £90,000 taxable turnover. Keep clean records that separate the two income streams, because HMRC asks for the split whenever a mixed portfolio registers. What If I Go Over the Threshold for One Year Only? Registration still applies from the trigger date, and you stay registered until turnover falls below the £88,000 deregistration threshold on a rolling 12-month view. A single exceptional year can therefore pull you into the system for two or three years. Can I Avoid VAT by Using Separate Companies or Family Members? HMRC can aggregate businesses with financial, economic or organisational links and require a single registration. Are Deposits and Cancellation Charges Taxable? Yes. VAT is due when you receive a deposit or cancellation fee unless the money is refunded. Get Free Consultation Call Anytime 0203 883 4777 Get Free Consultation How Apex Accountants Can Help Our VAT team handles the full holiday let journey.We provide practical advice on VAT on furnished holiday lets, from registration and pricing to VAT returns and mixed property portfolios. We monitor your rolling turnover and flag the trigger month before it arrives, run the registration with HMRC so the effective date lands correctly, and model the absorb-versus-pass-on pricing decision with real numbers from your season. We advise on Flat Rate Scheme eligibility, including the limited-cost test, and we review whether the winter-let structure of your property qualifies for the exempt treatment. If a past crossing date concerns you, we manage the voluntary disclosure and negotiate the penalty band. For a mixed portfolio, we set up the partial exemption records that keep your residential income outside the VAT net while your holiday lets stay compliant. Book a consultation and bring your last 12 months of booking statements; we will tell you where you stand against the threshold within one meeting. If a sale is on the horizon, our capital gains team coordinates the disposal planning alongside the VAT position.
VAT on Listed Buildings: A Guide for Historical Preservation Societies Posted on 7 October 20269 October 2026 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 Most repair and maintenance work on listed buildings is subject to VAT at the standard 20% rate. In practice, VAT on listed building repairs is therefore normally charged at 20%, as listing a building does not by itself create a reduced or zero VAT rate. The former zero rate for approved alterations was withdrawn in 2012, although other specific reliefs can still apply depending on the type of work and use of the property. 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: Charity status does not automatically remove VAT from repair or maintenance work. However, qualifying organisations may be able to access separate funding programmes. The Listed Places of Worship Grant Scheme closed in March 2026 and has been replaced in England by the Places of Worship Renewal Fund, which provides capital grants for eligible listed places of worship. VAT on Historical Buildings VAT on historical buildings generally follows the same principles as VAT on other existing properties. Most maintenance, repair and restoration work is charged at the standard 20% rate, although specific conditions may allow a reduced rate or other 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. Funding Support: Eligible listed places of worship in England may be able to access the Places of Worship Renewal Fund for qualifying urgent repairs and essential improvements. This is a grant programme rather than a general VAT exemption. VAT on Maintenance and Repairs of Historical Buildings For most preservation societies, VAT on listed building repairs and other maintenance work on historical properties is charged at the standard 20% rate. This can create a significant additional cost for restoration projects, although particular conversions, vacant residential properties and other qualifying works may receive different VAT treatment. Worked example: If qualifying repair work on a listed building costs £50,000 before VAT and no reduced rate or relief applies, VAT at 20% adds £10,000, bringing the total project cost to £60,000. For a preservation society that cannot recover that VAT, the full £10,000 becomes part of the project cost. 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: Certain qualifying conversions of non-residential buildings into dwellings may benefit from the 5% reduced VAT rate on eligible conversion work. Separate rules may allow zero-rating on the first sale or long lease of some converted properties, so the treatment should be checked for each project. Renovation of Empty Residential Buildings: Certain qualifying renovation or alteration work to residential premises that have been empty for at least two years may qualify for the 5% reduced VAT rate, subject to HMRC’s conditions. 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: Certain qualifying conversions of non-residential buildings into dwellings may receive the 5% reduced VAT rate on eligible building work. Separate zero-rating rules may apply to particular sales or long leases, so the treatment depends on the transaction and project. 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. Get Free Consultation Call Anytime 0203 883 4777 Get Free Consultation 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: Funding and VAT relief should be checked before project budgets are finalised, as eligibility depends on the organisation, building and type of work involved. Preservation societies can also read our guide to tax relief for historical preservation societies when reviewing the wider tax position of a project. Use Specialist VAT Advice Early: The VAT rules for historical preservation societies can vary depending on the building, its use and the type of work being carried out. Getting specialist advice early can help identify the correct VAT treatment before contracts and project budgets are finalised. Organisations managing VAT more widely can also read our guide to claiming VAT while maintaining compliance. Budget for VAT Costs: When budgeting for VAT on historical buildings, preservation societies should normally allow for the standard 20% rate unless a specific reduced rate or relief has been confirmed for the project. 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. Organisations looking for wider accounting, tax and financial support can also explore our accounting services for historical preservation societies. 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? A preservation society may be able to recover VAT if it is VAT-registered and the costs relate to its taxable business activities. VAT linked to exempt or non-business activities may be restricted or irrecoverable, and organisations carrying out both taxable and exempt activities may need to apply partial-exemption rules. 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 funding support is available for VAT and repairs to listed places of worship? The Listed Places of Worship Grant Scheme closed on 31 March 2026. In England, the Places of Worship Renewal Fund now provides grants for eligible urgent repairs and essential improvements to listed places of worship. This is a funding programme rather than a general VAT exemption, so eligibility and covered costs should be checked separately. 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? Charity status does not automatically make repair or maintenance work VAT-free. Most such work remains standard-rated at 20%. Specific VAT reliefs may apply to qualifying new construction, certain charitable-use buildings or other narrowly defined circumstances, so the treatment should be checked against the nature of the project. 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? No broad reduction in VAT on listed-building repairs has been introduced. Repair and maintenance work generally remains standard-rated at 20%. However, heritage funding arrangements have changed, including the replacement of the Listed Places of Worship Grant Scheme in England with the Places of Worship Renewal Fund. 11. Is there VAT on rebuilding costs of a listed building? In most cases, repair, restoration and rebuilding work to an existing listed building is subject to the standard 20% VAT rate. Different rules can apply where a project amounts to qualifying new construction, a residential conversion or a substantial reconstruction meeting specific HMRC conditions, so the VAT treatment depends on the exact nature of the work.
What the Glasgow Restaurant VAT Fraud Case Teaches About Tax Compliance Posted on 6 October 20266 October 2026 by Talha Zubair In a recent case in Glasgow, two restaurant owners were found guilty of carrying out nearly a £700,000 VAT fraud scheme. This shocking case highlights the importance of maintaining proper financial records and adhering to VAT regulations. The Glasgow Restaurant VAT Fraud Case Two Glasgow restaurateurs were jailed after pleading guilty to large-scale VAT fraud. Antonio Carbajosa (41) and Kevin Campbell (44), involved in the Glasgow Restaurant VAT Fraud Case, ran several Glasgow venues — including Cranside Kitchen, Pickled Ginger, and Halloumi. They admitted fraudulently evading VAT for £682,882 between November 2011 and October 2016. Their accountant, Khalid Javid (67), also pleaded guilty to submitting false VAT returns on their behalf. PersonRoleChargeOutcomeAntonio Carbajosa (41)RestaurateurFraudulent evasion of £682,882 VAT3 years in prisonKevin Campbell (44)RestaurateurFraudulent evasion of £682,882 VAT3 years in prisonKhalid Javid (67)AccountantFalse statements in VAT returns (2 companies)Pleaded guilty; sentencing pending How Was the £700k VAT Fraud Scheme Exposed Both owners suppressed their true sales figures and under-declared their takings. This meant their businesses kept cash that should have gone to HMRC as VAT. HMRC investigators spotted unexplained discrepancies in the VAT returns. An inquiry called Operation Keyholder followed, with forensic accountants examining accounts from 2012 to 2016. The probe confirmed a total VAT shortfall of £682,882. Three of their companies were never registered for VAT at all — despite having annual turnovers well above the registration threshold. The two restaurateurs admitted they and their accountant “acted together in a co-ordinated way” to cheat the VAT system. By hiding sales, the businesses appeared smaller. As the prosecutor noted, the companies could pay bills and draw higher wages because they were pocketing VAT that should have gone to HMRC. Recent VAT Cases in UK: Shop Owner Pleads Guilty to Duty and VAT Fraud in South Belfast Everything About HMRC v Colchester Institute VAT Dispute Pre-registration VAT Recovery in UK Clarified by Tribunal Ruling – What it Means for Businesses UK VAT On Prize Draws Faces Scrutiny As HMRC Clarifies Tax Position How VAT for Restaurants Work Food and drink consumed on the premises is always standard-rated at 20% VAT Service charges and paid tips on top of meals are also subject to VAT Hot takeaway food is usually standard-rated. Cold takeaways and most plain foods are zero-rated or exempt The VAT registration threshold (since April 2024) is £90,000 of taxable turnover Any business expecting to exceed that in a 12-month period must register and start charging VAT. Businesses must also: Issue proper VAT invoices Keep till receipts and bank statements Pay all VAT collected to HMRC Retain all records for at least 6 years Consequences of VAT Fraud Under Section 72 of the Value Added Tax Act 1994, fraudulently evading VAT can lead to: Up to 7 years in prison Unlimited fines Confiscation (POCA) orders to seize illicit gains Criminal records and business bans Reputational damage Penalties are not limited to business owners. Corporate officers and accountants can also be prosecuted — as this case shows with Mr Javid. Get Free Consultation Call Anytime 0203 883 4777 Get Free Consultation How HMRC Catches VAT Fraud HMRC uses automated data-matching and analytics to flag anomalies. In this case, HMRC noticed discrepancies in the VAT returns of two of the businesses, which triggered Operation Keyholder. Common red flags include: Missing till records Undeclared cash sales Invoices that don’t add up HMRC cross-checks VAT returns against bank deposits, industry benchmarks, and supplier statements. How We Help Restaurants Manage VAT and Stay Compliant At Apex Accountants we help businesses navigate VAT rules and handle HMRC enquiries. Our services include: VAT compliance reviews: We review your sales and records to ensure returns are correct and complete VAT registration & planning: We advise on when and how to register, and on available VAT schemes for hospitality businesses Support during HMRC investigations: Our experts guide you through meetings, help prepare responses, and liaise on your behalf Forensic accounting & recovery planning: In serious cases, we reconstruct finances to clarify tax liabilities and protect your interests Proper guidance can significantly impact the outcome of an investigation, ensuring a smooth process rather than a costly one. Get Free Consultation Call Anytime 0203 883 4777 Get Free Consultation FAQs About VAT For Restaurants Is all restaurant food subject to VAT? Generally yes. Food eaten on-site is standard-rated at 20%. Some cold takeaway food may be zero-rated, but on-premises meals and drinks are a clear-cut VAT case. What if I forget to register for VAT? HMRC can backdate the VAT liability. You may owe unpaid VAT, penalties of up to 100% of the amount owed, and interest. Voluntary early disclosure usually reduces penalties; hiding it can lead to criminal investigation. Can I get in trouble for honest mistakes? HMRC understands errors happen. Genuine mistakes may attract lower penalties. But deliberate under-reporting or falsifying returns is treated as fraud. Even reckless inaccuracies carry serious consequences. Do I have to repay VAT after conviction? HMRC usually tries to recover unpaid VAT through court orders. Businesses should assume they will be held responsible for all unpaid tax. How can I avoid VAT penalties? Register for VAT when required Charge the correct VAT rates on each sale Keep all invoices, receipts and till rolls File accurate VAT returns and pay on time Get professional advice quickly if HMRC contacts you What can restaurant owners learn from the Glasgow restaurant VAT fraud case? The case shows that HMRC treats deliberately suppressed sales and false VAT records as serious tax fraud, not ordinary bookkeeping errors. Restaurant owners should reconcile till records, card receipts, cash takings and bankings; declare all taxable sales, including cash sales; retain supporting records; and obtain professional advice promptly if HMRC opens a VAT compliance check. What are the penalties for VAT fraud in the UK? Deliberate VAT inaccuracies can result in a civil penalty of up to 70% of the potential lost revenue. Where the inaccuracy was deliberate and concealed, the penalty can be up to 100%, depending on the circumstances and the quality of the disclosure. HMRC may also assess the unpaid VAT and charge interest. In serious cases, HMRC can begin a criminal investigation, which may lead to prosecution, fines and imprisonment. How should a restaurant prepare for a VAT compliance check? Before a VAT compliance check, restaurant owners should organise till and point-of-sale reports, booking records, card-payment reports, cash records, bank statements, purchase invoices and VAT returns. Sales records should be reconciled regularly so that cash and card takings are fully accounted for. Businesses should retain the records supporting VAT returns and input-tax claims, file VAT returns accurately and on time, and discuss any payment difficulty with HMRC promptly. The business should also ask its accountant to review the records and identify any errors before responding to HMRC.
What You Need to Know About VAT Exemption for Cultural Services Posted on 6 October 20268 October 2026 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. Organisations that need a broader overview of registration, VAT rates and general compliance can also read our guide to everything you need to know about VAT. 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. Get Free Consultation Call Anytime 0203 883 4777 Get Free Consultation 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 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. Map your income streams – separate admission income from retail, commercial hire, food & drink, and sponsorship. Structure ticketing and bundles – ensure admission is clearly priced separately if you bundle it with other items. Maintain proper records – board minutes, pricing policies, ticket terms, and accounting segregation. HMRC expects evidence. If your organisation is VAT registered, it is also important to understand the wider requirements around VAT returns in the UK, including accurate reporting and record-keeping. 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. Get Free Consultation Call Anytime 0203 883 4777 Get Free Consultation Frequently Asked Questions What does the VAT exemption for cultural services cover? It can cover admission charges by eligible bodies to public exhibitions, theatrical, musical and choreographic performances and similar cultural events. The supply must meet the qualifying conditions set out in the cultural services rules, and not every arts event qualifies. Who can use the cultural services exemption? Public bodies and non-profit organisations that are managed and administered on a voluntary basis and meet the qualifying conditions. Commercial operators cannot use the exemption even when the event itself is cultural in nature. Why might an arts organisation choose taxable over exempt? Exemption blocks recovery of input VAT on the related costs, so an organisation with significant recoverable costs may be better off charging 20% VAT and reclaiming its inputs. The right choice depends on the cost base and the audience’s ability to bear VAT.
VAT Rules for Subscription-Based Online Learning Platforms in the UK Posted on 2 October 20262 October 2026 by Farazia Gillani Online learning platforms continue to grow quickly. Current VAT rules and cross-border requirements directly affect subscription-based online learning platforms across the UK. As platforms scale, many face new uncertainty around exemptions, cross-border learners, and mixed digital services, which can lead to pricing complications and VAT mistakes. These issues often arise in models built around subscriptions, mentoring, and digital content. Apex Accountants helps these businesses by providing clear VAT classification, accurate billing structures, and compliant systems that reduce risk and support confident growth. Understanding VAT Rules for Subscription-Based Online Learning Platforms Most subscription-based platforms operate as companies and supply structured digital content. Under current HMRC rules, the VAT treatment depends on the nature of the education or digital service supplied. Some automated digital services may be standard rated, while certain education and private tuition supplies may qualify for exemption where the relevant conditions are met. This creates a clear compliance need and highlights the growing importance of VAT compliance for online learning platforms as they expand their digital offerings.For platforms reviewing their pricing structure, a common question remains: do subscriptions have VAT in the UK? The answer depends on the nature of the supply, whether an exemption applies and where the customer is located. The exemption routes are narrow: Private tuition supplied by an individual tutor may qualify for exemption where the tutor meets HMRC’s conditions and teaches a subject ordinarily taught in a school or university. Courses delivered by an “eligible body,” such as a university or certain non-profit organisations, may also be exempt. Before setting prices, platforms should establish the correct VAT on subscriptions treatment for each type of membership, course or digital service they provide. However, many online platforms fall outside these rules. Where education is supplied through a company, platform or other organisation, the exemption must be considered against the specific conditions applying to that supply. Subcontracting tutors or combining teaching with other services can also affect the VAT treatment. Recent HMRC guidance on education supplied by alternative providers of higher and further education has also highlighted the importance of assessing the specific VAT exemption conditions applying to education supplies. Cross-Border Subscribers and VAT in 2026 As subscription learning becomes increasingly global, cross-border VAT rules have a greater impact. For UK platforms, the VAT treatment of learner subscriptions depends on the nature of the service, the customer’s location and whether the customer is a business or consumer. Supplies to non-UK customers may be subject to the VAT rules of the customer’s country. For businesses serving customers overseas, HMRC’s guidance on the place of supply of services explains which country’s VAT rules may apply. The topic is now a major area of cross-border VAT rules for online learning platforms, especially for businesses serving multiple countries. The correct subscriptions VAT can differ depending on the customer’s location, the type of service supplied and whether the customer is a business or consumer. These rules become more complex when platforms operate across continents or sell a mix of digital and educational services. To stay compliant, providers must segment subscriber data by country, apply the correct VAT treatment for each group and embed cross-border VAT logic in their billing systems. As platforms expand, effective management of cross-border VAT rules for online learning platforms becomes essential to avoid international VAT errors. Practical VAT Steps for 2026 To stay compliant and avoid costly mistakes, subscription-based online education providers should: Map every revenue stream, including bundles, trials and upsells Classify each supply as exempt education, standard-rated education or digital services Segment subscriber data by country, B2B or B2C status and VAT numbers Build VAT rules into billing systems, checkout flows and invoicing Maintain digital records and prepare systems for Making Tax Digital (MTD) These actions help platforms build VAT-ready processes that support accurate reporting and sustainable growth. Providers should also review whether subscriptions have VAT implications whenever they introduce a new subscription tier, bundle additional services or change how customers access digital content. Case study: VAT Compliance for a Subscription-Based Learning Platform A subscription-based online education provider approached Apex Accountants after the rapid growth of VAT issues. They were unsure how to treat UK and overseas learners and had bundled subscriptions, mentoring sessions, and certification upgrades without identifying the correct VAT treatment for each element. We reviewed their full model, classified each service correctly and segmented their subscribers by location. Apex Accountants then built VAT logic into their billing system and supported their VAT registration. As a result, they charged UK learners correctly, treated overseas learners consistently, and avoided a significant VAT exposure. The review also considered the VAT on subscriptions alongside mentoring and certification charges, helping the provider apply consistent VAT treatment across its different revenue streams. How Apex Accountants Can Help Subscription-Based Online Learning Platforms Apex Accountants provides VAT frameworks that match the way subscription-based online education platforms operate. We classify supplies correctly, apply the right VAT rules and build processes that support long-term growth without unnecessary tax risks. Our support includes: Classifying subscriptions, mentoring, and certification services Applying correct VAT rules for UK and overseas learners Setting up and managing VAT registration and returns Advising on exemption routes and eligible body status Preparing systems for MTD and HMRC reviews With the right VAT structure in place, subscription platforms can scale with clarity and confidence. Apex Accountants provides the specialist support needed to stay compliant while running a successful online learning business. To review your VAT position, contact Apex Accountants today and speak to our expert team. Frequently Asked Questions 1. Are subscriptions a digital service for VAT purposes?Not necessarily. The VAT treatment depends on what the subscription provides. Automated digital content may be treated as an electronically supplied service, while live teaching, tutoring or other human-led services can have different VAT rules. 2. Is there VAT on online training courses?Online training courses may be subject to VAT, but the treatment depends on how the course is delivered and whether an education exemption applies. Automated or pre-recorded digital content can have different VAT treatment from live, teacher-led training. 3. Are subscriptions exempt from VAT?Subscriptions are not automatically VAT-exempt. Whether VAT applies depends on the underlying service, the supplier, the customer and, for education-related subscriptions, whether the relevant exemption conditions are met. 4. Are educational services exempt from VAT?Some educational services can be VAT-exempt when the specific HMRC conditions are satisfied. The exemption can depend on who provides the education, what is being taught and how the service is supplied, so not every online educational service qualifies. 5. Does a subscription have VAT?A subscription can have VAT if the underlying supply is taxable. The VAT treatment depends on the type of subscription, the nature of the service and the customer’s location. For online learning platforms, these factors should be reviewed before deciding whether VAT should be charged.
UK’s New “Taxi Tax”: What the VAT Crackdown on Uber and Bolt Means for Drivers and Passengers Posted on 2 October 20268 October 2026 by Rida Ahmed The UK’s Autumn Budget 2025 introduced a major tax change for the private‑hire sector. Since 2 January 2026, large ride‑hailing operators in London, such as Uber and Bolt, can no longer apply the Tour Operators’ Margin Scheme (TOMS) to their fares. This new taxi tax means they must charge 20% VAT on the full fare, not just on their margin. HM Treasury claims that this move will eliminate a tax loophole, establish fair competition for black taxi drivers, and generate approximately £700 million in revenue. This article looks at why private hire VAT changes were introduced, how they work, and what they mean for passengers, drivers, and operators. It also explains how Apex Accountants can help your business comply with the new rules. Why Was the Tour Operators’ Margin Scheme Being Used? The Tour Operators’ Margin Scheme is a special VAT scheme designed for tour operators selling travel packages. It allows companies to pay VAT only on their profit margin rather than on the full cost of the trip, often reducing the effective VAT rate to around 4%. In recent years some large ride‑hailing firms applied the scheme to domestic private‑hire journeys. This meant they charged VAT only on their commission after paying drivers and not on the entire fare. In London, courts have ruled that ride‑hailing operators act as principals in the supply of passenger transport, so they must collect VAT on the full fare. Outside London, operators could continue acting as agents, accounting for VAT only on their commission. The Upper Tribunal ruled in March 2025 that Bolt’s ride-hailing services could fall within TOMS. HMRC appealed, and on 12 June 2026 the Court of Appeal allowed HMRC’s appeal. Separately, the Finance Act 2026 now excludes taxi and private-hire passenger journeys from TOMS for supplies made on or after 2 January 2026, except where the journey is supplied alongside and is ancillary to certain other travel services. What is the change in VAT on Taxi Fares in the UK from January 2026? The policy paper “Private Hire Vehicle Operators and the Change in Legislation for the Tour Operators’ Margin Scheme” sets out the details. The key points of Reeves’ private hire VAT are: Exclusion from TOMS – Section 53 of the VAT Act 1994 is amended to exclude suppliers of taxi and private-hire journeys from being “tour operators” for VAT purposes, except when the journey is supplied as part of a wider travel package. Effective date – The VAT on taxi fares UK rule applies to journeys from 2 January 2026. Scope: The change affects businesses that buy in and resell taxi or private hire journeys as principals or as agents acting in their names. Journeys where drivers provide the service directly, as disclosed, are unaffected. Exceptions – TOMS remains available when a taxi or mini‑cab ride is supplied in conjunction with accommodation or another principal travel service, such as part of a holiday package. Exchequer impact – HM Treasury expects the measure to raise around £190 million in 2025‑26 and £725 million in 2026‑27, tapering slightly in later years. Get Free Consultation Call Anytime 0203 883 4777 Get Free Consultation The Impact Of the London Taxi VAT Increase In London, private‑hire operators are legally required to act as principals when supplying journeys to passengers. Acting as principal means the company sells the entire transport service and must account for VAT on the full fare, not just its commission. Now that the new VAT rules for London taxis have taken effect, ride-hailing firms in London must account for VAT on the full fare at the standard 20% VAT rate, increasing the VAT due on these journeys. Outside London, regulations may still allow operators to act as agents. Where the driver is the supplier, the operator generally accounts for VAT on its commission. The driver only needs to charge and account for VAT on their own taxable supplies if they are VAT-registered or required to register. The VAT registration threshold remains £90,000 for 2026/27. Uber has responded by rewriting driver contracts outside London so that the company acts as an agent, meaning VAT continues to apply only to its commission. As per recent reports, the new contracts make drivers contract directly with passengers, leaving Uber to add VAT solely to its commission. Because drivers seldom reach the VAT threshold, most fares outside London will avoid the 20% tax. Impact on Fares and the Cost of Living Expected Fare Increases Official documents do not specify exactly how much fares will rise, but industry estimates provide a guide: It is suggested that adding 20% VAT could add £2–£3 to a £12 journey. Insurance broker INSHUR estimates that a £20 fare may increase to £24. Uber’s UK general manager, Andrew Brem, warns that the government’s action will “mean higher prices for passengers in London and less work for drivers.” These estimates imply that passengers could see fare increases of roughly 15–20%. A survey indicates that 70% of passengers would reduce or stop using private‑hire services if fares increased by 20%. This suggests the VAT on taxi fares in the UK may have a noticeable effect on demand, particularly for short trips. Reeves Private Hire VAT Impact on Drivers and Operators Drivers’ earnings – Many drivers are self-employed and earn less than the VAT threshold. If the operator acts as an agent, drivers only charge VAT on their own taxable supplies if they are VAT-registered or required to register, so the impact on fares may be more limited. However, in London, the operator must act as principal, meaning the fares will include VAT. Operators may choose to share the cost with drivers, potentially reducing earnings. Reduced demand – Higher fares could lead to fewer trips, particularly outside peak hours. Lower utilisation could squeeze drivers’ incomes. Business models – Large operators like Uber and Bolt are revising their business models. Outside London they are switching to an agency model to avoid charging VAT on full fares. In London, operators may still look for efficiency gains or promotional pricing to remain competitive. Small operators and black cabs – Smaller taxi and private‑hire firms that already pay full VAT or operate below the threshold are largely unaffected. The Licensed Taxi Drivers Association welcomed the private hire VAT changes as a “landmark step for fairness”, arguing they end the competitive advantage enjoyed by ride-hailing platforms. Wider Impacts of Reeves’ Private Hire VAT The Treasury expects the reform to raise around £700 million per year. Officials say the revenue will help fund priorities such as cutting the cost of living, reducing waiting lists and reducing national debt. While black cab drivers see the measure as levelling the playing field, hospitality and transport groups warn that higher fares could deter people from travelling for leisure or work. Some commentators argue that a lower VAT rate on transport would have encouraged mobility and economic activity. The debate shows the challenge of balancing tax fairness with affordability. How We Can Help Navigate the New Taxi Tax in UK Apex Accountants understands how new tax rules can disrupt your business. Our team of VAT specialists can help private hire operators, taxi firms, and self-employed drivers navigate the 2026 VAT changes. We offer: VAT registration and compliance – Assess whether you must register, prepare VAT returns and ensure you collect the correct tax. Business model reviews – Clarify whether you should operate as an agent or principal, calculate the impact on your margins and draft clear contracts. Accounting software setup – Integrate digital tools to automate VAT calculations and recordkeeping, with outsourced bookkeeping for VAT records available where ongoing support is needed. Company tax support – Private-hire operators trading through limited companies can also use our corporation tax services for company tax calculations, returns and wider compliance. Training and support – Provide guidance on invoicing, VAT thresholds and claiming input tax to maximise deductions. Industry updates – Keep you informed about further changes to licensing, HMRC guidance and relevant court decisions. Conclusion The government’s decision to close the TOMS loophole marks a major shift in VAT on online cab companies. Since 2 January 2026, large operators in London must charge 20% VAT on the full fare, bringing their tax treatment closer to that of black cabs. Outside London, operators can still act as agents, so many fares remain VAT‑free. Industry estimates have suggested that some London fares could rise by around 15–20%, although the actual impact will depend on how individual operators respond to the VAT change. With proper planning and professional advice, businesses can adapt to the new landscape. For tailored guidance on VAT, tax planning and compliance, Apex Accountants is here to help you navigate the roads ahead. Frequently Asked Questions About VAT for Online Cab Companies What is the Tour Operators’ Margin Scheme (TOMS)? The TOMS is a simplified VAT scheme for travel companies that buy and resell travel services. It allows firms to pay VAT on their margin (profit) rather than the full selling price. It was designed for travel packages such as holidays. Under TOMS, operators normally pay an effective VAT rate of around 4%, compared with the standard 20%. Why were ride‑hailing companies using TOMS? Following earlier tribunal decisions, some private-hire companies acting as principals argued that TOMS could apply to domestic passenger journeys, allowing VAT to be calculated on the margin rather than the full fare. HMRC disputed that interpretation. Although the Upper Tribunal ruled in Bolt’s favour in March 2025, the Court of Appeal allowed HMRC’s appeal in June 2026. The Finance Act 2026 also excludes qualifying taxi and private-hire journeys from TOMS from 2 January 2026, subject to limited travel-package exceptions. When did the new VAT rule start? The exclusion from TOMS applies to journeys supplied on or after 2 January 2026. Since that date has now passed, all affected journeys are subject to the new rules. Who pays the VAT under the new rules? If a private-hire operator acts as principal and is VAT-registered, it accounts for VAT on the full fare. Where an operator acts as an agent, it generally accounts for VAT on its commission, while the driver is responsible for VAT on their own taxable supplies if they are VAT-registered or required to register. The current VAT registration threshold is £90,000. Will fares outside London go up? Outside London, operators may continue using an agency model and pay VAT only on their commission. If operators adopt this model, the new rules may not result in VAT being charged on the full fare where the driver is not VAT-registered, although individual operators may still change their pricing. However, regional authorities could tighten their licensing rules, so passengers should verify their local operator’s pricing. Are there any exceptions? Yes. The new legislation still allows TOMS to apply when the taxi journey is supplied as part of a wider travel package – for example, a hotel booking that includes a transfer. In these cases, the ride is considered ancillary to the main travel service. Get Free Consultation Call Anytime 0203 883 4777 Get Free Consultation How can drivers and operators prepare? Review contracts and business models – Determine whether you will act as principal or agent for each type of journey. Monitor earnings – Self‑employed drivers should track their turnover to see if it approaches the £90,000 VAT threshold. Exceeding it triggers compulsory registration. Update booking systems – Ensure your software applies the correct VAT rate from 2 January 2026. Communicate with customers – Be transparent about price changes to avoid confusion. Seek professional advice – Understanding VAT rules can be complex. Working with an accountant or tax advisor can help you stay compliant and minimise costs.
