Accountant for Community Pharmacy UK: VAT and Tax Guide Posted on 31 August 202616 September 2026 by Farazia Gillani A pharmacy can look profitable on paper while still facing tight cash flow. NHS income, retail sales, dispensing margins, staff costs, stock movements and VAT liabilities can be recognised at different times and require different accounting treatment. That is why an accountant for community pharmacy UK businesses rely on should understand how a pharmacy operates, not simply submit a year-end return. The immediate priorities are usually accurate community pharmacy VAT treatment, reliable branch-level reporting, payroll control, stock accounting, pharmacy bookkeeping and tax planning that reflects how the business actually trades. Key takeaways Community pharmacies can make a mixture of zero-rated, exempt, standard-rated and, in some cases, outside-the-scope supplies. The VAT treatment depends on the underlying goods or services and the relevant conditions. HMRC’s VAT Notice 701/57 and VAT Health manual explain important rules for pharmacists and dispensed medicines. England’s 2026–27 Community Pharmacy Contractual Framework provides total funding of £3.636 billion. This is sector funding, not a guaranteed amount for an individual pharmacy. Good pharmacy bookkeeping should reconcile NHS remittances, dispensing data, retail tills, stock, payroll and supplier statements. A specialist review can be particularly useful before a VAT compliance check, acquisition, restructuring or major funding change. Why does a community pharmacy need specialist accounting support? A community pharmacy has several revenue streams and cost patterns that can make generic small-business bookkeeping unreliable. NHS dispensing, private prescriptions, over-the-counter medicines, consultations, vaccinations, delivery charges and retail products do not necessarily share the same VAT treatment. The accounts also need to explain operational performance. A single sales total can hide weak margins in one branch, stock losses, rising locum costs or a funding payment posted to the wrong accounting period. A specialist pharmacy tax accountant should connect the bookkeeping to practical decisions, including: branch profitability and cash generation; staffing, locum and overtime costs; stock movements, expiries and gross margins; acquisition funding and deal structure; and owner salary, dividend and pension decisions. Apex’s healthcare sector accountants can support pharmacy owners who need accounting, payroll, VAT and tax advice to work together rather than sit in separate files. How does VAT work for a UK community pharmacy? VAT treatment in a pharmacy is transaction-specific. It is not safe to assume that every medicine is zero-rated, every clinical service is exempt or every NHS-related payment has one automatic VAT outcome. HMRC’s VAT Notice 701/57 explains the VAT treatment of goods and services provided by registered health professionals, including pharmacists. It also covers VAT recovery for VAT-registered health professionals and the rules applying to pharmaceutical goods. HMRC’s VAT Health guidance on dispensing by a pharmacist confirms that most dispensing in a traditional community pharmacy is zero-rated where the relevant statutory conditions or NHS prescription concessions are met. The precise facts still need to be checked. Pharmacy activityWhy the VAT treatment needs checkingQualifying prescription dispensingZero-rating can apply when the relevant conditions are met.Over-the-counter medicines and toiletriesMany retail supplies are standard-rated, while some products can have a different treatment.Vaccination or other clinical servicesExemption can apply to qualifying medical care, but not every service is automatically exempt.NHS or commissioner-funded servicesThe underlying supply, contractual terms and payment must be considered together.Management or administration chargesThese can have a different liability from the medicines or care element.Purchases and overheadsInput VAT recovery can be restricted where costs relate to exempt or non-business activities. The legislation underpinning zero-rating includes Schedule 8 to the Value Added Tax Act 1994. HMRC guidance should be read alongside the legislation and the facts of each transaction. A specialist VAT review can test till setup, product coding, invoice wording, NHS remittance entries and partial-exemption calculations. For a pharmacy with mixed activities, a periodic community pharmacy VAT review can also confirm that output VAT and input VAT recovery remain consistent with current trading. What changed for NHS pharmacy funding in 2026–27? For England, the Community Pharmacy Contractual Framework for 2026 to 2027 states that total funding will be £3.636 billion, representing a 10.3% increase compared with 2025–26. GOV.UK also confirms an agreement not to recover up to £239 million of historic over-paid funding from the sector. These are national NHS pharmacy funding figures for England. They do not predict a particular pharmacy’s income, profit or cash receipts. An individual pharmacy’s position depends on its services, dispensing volume, reimbursement, clawbacks, staffing and other costs. The framework also covers independent prescribing, the Pharmacy Quality Scheme and regulatory changes. These developments can create accounting questions around the timing, classification and evidence for income and expenditure. A pharmacy should therefore reconcile each service or activity to: the remittance or payment received; the accounting period to which it relates; and any deduction, adjustment, clawback or repayment. This provides a stronger basis for cash-flow forecasting and for answering questions from HMRC, lenders or a potential buyer. As NHS pharmacy funding arrangements change, the records should distinguish recurring, activity-based, one-off and adjustable income. Get Free Consultation Call Anytime 0203 883 4777 Get Free Consultation Which records should a pharmacy accountant review every month? Monthly reporting should show what is happening before the annual accounts deadline. At a minimum, the review should cover bank reconciliations, supplier balances, payroll, VAT control accounts, stock and NHS or commissioner remittances. Useful monthly controls include: comparing dispensing and retail revenue with the till and pharmacy system; reconciling NHS payments to claims or remittance statements; reviewing negative or unusually high gross margins; checking stock purchases, write-offs, expiries and shrinkage; separating owner drawings, wages, dividends and business expenses; checking locum invoices and employment-status treatment where necessary; and reviewing aged creditors before supplier pressure affects cash flow. For multi-branch operators, management accounts should show branch-level sales, gross margin, payroll, occupancy, locum costs and contribution. Strong pharmacy bookkeeping should create a reliable link between operational activity, cash movements and management reporting. Apex’s accounting services can be combined with pharmacy-specific controls to produce management information that supports decisions as well as compliance. How should pharmacy owners approach corporation tax and payroll? A limited company pharmacy normally needs statutory accounts and a Company Tax Return, with corporation tax calculated from adjusted taxable profits. Taxable profit can differ from management profit because of capital allowances, disallowable expenses, timing rules and other tax adjustments. For pharmacy corporation tax planning, owners should look beyond the year-end liability. Equipment investment, acquisition costs, remuneration decisions and the timing of significant expenditure can affect both tax and cash flow. The company should also keep payroll and dividends distinct. Salary and employer costs run through payroll, while dividends must be supported by available profits and appropriate company records. Treating every payment to an owner as a dividend can create tax and accounting problems. Pharmacy employers should review PAYE, pension duties, holiday pay, overtime, locum arrangements and benefits. Staff costs are often one of the largest controllable expenses, so errors can affect both compliance and profitability. Where a pharmacy is buying another branch or company, advice should begin before the deal is agreed. The review may cover stock valuation, goodwill, fixtures, property, debt, VAT history, employees and the structure of the purchase. A specialist corporation tax adviser can model these consequences, especially where pharmacy corporation tax planning overlaps with an acquisition, restructuring or change in ownership. What is a simple pharmacy VAT error example? Suppose a pharmacy codes every sale as standard-rated because it sells both retail goods and prescription medicines. This could overstate output VAT on qualifying zero-rated supplies. The opposite error is also possible if zero-rating is applied to goods or services that do not meet the relevant conditions. The pharmacy would need to identify the affected transactions, inspect the supporting records, check the applicable HMRC guidance and determine whether previously submitted VAT returns need correcting. Real pharmacies can also have mixed supplies, NHS payments, private work and shared overheads, so the correct treatment may require a broader review of VAT liability and input tax recovery. Do community pharmacies need a VAT partial-exemption review? They may. Partial exemption can become relevant when a VAT-registered pharmacy makes both taxable and exempt supplies and incurs VAT on costs relating to those activities. A pharmacy should not assume that every amount of input VAT is recoverable simply because the business is VAT-registered. It should document the link between costs and supplies, apply the appropriate method and retain evidence supporting the figures reported. How can a pharmacy prepare for an HMRC VAT compliance check? Start with a clean audit trail. HMRC should be able to follow a sample transaction from the till, dispensing system or service contract through the ledger, VAT code, VAT return and bank or remittance reconciliation. Before a compliance check, review: VAT registration details and return periods; product and service VAT codes; NHS and commissioner remittances; private prescription and retail sales; input VAT on stock, rent, equipment and professional costs; partial-exemption calculations, where relevant; and prior corrections, disclosures and correspondence. If an error is identified, quantify it, preserve the working papers and obtain advice on the correct amendment or disclosure route. Frequently Asked Questions Is a pharmacy accountant more expensive than a general accountant? Fees depend on branch count, transaction volume, payroll, VAT complexity and the level of reporting required. Specialist work can cost more than basic compliance, but it may also identify recurring VAT, stock or payroll errors. Can a pharmacy accountant help with buying another pharmacy? Yes. An accountant can assess management accounts, stock, goodwill, VAT history, payroll, funding, cash flow and the tax effects of different deal structures. Advice is most useful before heads of terms or a purchase agreement is finalised. Does NHS pharmacy income automatically have no VAT? No. The VAT treatment depends on the underlying supply, the relevant conditions and how the payment relates to the goods or service. NHS dispensing income and other service funding should be analysed rather than placed into one automatic VAT category. What happens if a pharmacy has used the wrong VAT code? The business should identify the affected transactions, calculate the net error and check whether previously submitted VAT returns need correcting. The underlying coding should also be fixed so the problem does not continue. What does a pharmacy accountant need from the owner? Usually, the accountant needs sales and dispensing reports, NHS remittances, bank feeds, supplier statements, stock information, payroll data, VAT returns and details of unusual transactions. Can Apex support a pharmacy outside England? Apex can provide UK accounting, tax, payroll and VAT support, but the England-specific funding reference in this article should not be assumed to apply in the same way across Scotland, Wales or Northern Ireland. The relevant devolved arrangements and contracts should be checked for the pharmacy’s location. Get Free Consultation Call Anytime 0203 883 4777 Get Free Consultation Apex Accountants’ View Community pharmacy owners need financial information that reflects how the business actually operates. A year-end profit figure cannot show whether a branch is losing margin through stock expiry, whether locum spending is rising or whether an NHS payment has been posted to the wrong period. At Apex, we advise UK businesses on bookkeeping, VAT, payroll, corporation tax and management reporting. For pharmacies, that means connecting the ledger to dispensing activity, retail sales, remittances, stock and staff costs. A specialist pharmacy tax accountant should help maintain defensible records while making cash flow, margins and profitability easier to understand. Apex Accountants has supported UK businesses since 2006. The sensible starting point is a review of current records, VAT treatment and reporting needs so the accounting process reflects the pharmacy’s services, funding arrangements and growth plans.
VAT Recovery Business Cars UK: What You Can Claim on Leased and Purchased Vehicles Posted on 27 August 202611 October 2026 by Rida Ahmed UK VAT law imposes strict restrictions on VAT recovery for business cars that also serve private purposes. Generally, input tax on buying a car is blocked unless the vehicle is exclusively for business (or falls into special categories like taxis or pool cars). Leasing has different rules: usually 50% of VAT on hire charges is blocked to cover private use. Fuel and repairs follow separate rules. VAT on repairs and maintenance can normally be reclaimed where the vehicle is used for business purposes and the business pays for the work. For fuel used for both business and private journeys, businesses can either reclaim all the VAT and apply the appropriate HMRC fuel scale charge, or reclaim only the VAT relating to business mileage using detailed records. This article, based on HMRC guidance, explains the conditions for full, partial or no recovery of VAT on purchased and leased cars, including mixed-use vehicles. It also covers fuel and repair costs, record-keeping and disposal adjustments. Businesses that need help applying these rules can also explore our VAT services for businesses. VAT on purchased cars (including pool cars) As a rule, input VAT on the purchase of a car is irrecoverable if the car can be used privately. If an owner or employee makes a car available for private use, they cannot claim VAT on its purchase price. The few exceptions are the following: Exclusively business-use cars. The car must be used only for business journeys and not available for any private use. This requires strict facts (e.g., kept at business premises, no personal use permitted). Pool cars. A car shared by staff (not allocated to an individual or kept at home) qualifies for full recovery. It must be normally kept at the business and not used privately. Cars used for qualifying purposes. Full VAT recovery may be available where a qualifying car is intended to be used primarily as a taxi, for self-drive hire, or for providing driving instruction, subject to HMRC’s conditions. Stock-in-trade. Motor manufacturers and dealers may recover VAT on qualifying cars held as stock-in-trade where they intend to sell them within 12 months. However, second-hand cars that are not qualifying cars do not fall within this exception. Cars converted into commercial vehicles. VAT may be recoverable where a car is bought specifically for permanent conversion into a commercial vehicle and is not used as a car before the conversion. Separate VAT rules apply to vehicles constructed from kits or individually purchased new parts. Leaseback schemes. Special rules apply if a car is bought and leased back (100% input is allowed if output VAT is accounted for on resale). When claiming VAT on purchased cars under an exception, maintain evidence. For example, a “business-only” car should have a written policy banning private use, be parked on company premises, and be used on verifiable business trips. HMRC’s test focuses on availability for private use. If a car first qualifies for VAT reclaim and is later used privately, a self-supply adjustment is needed. In that case, output VAT is due on the car’s current value at the change of use. For information on company car tax bands, read: How Company Car Tax Bands Work and What You Will Pay VAT on leased vehicles VAT on leased cars is subject to specific rules where a qualifying vehicle is also available for private use. If a business leases a car which it can also use privately, only 50% of the VAT on each lease or rental invoice can be reclaimed. This 50% block is a proxy for the private use of the vehicle. The business can reclaim the other 50%, subject to normal input tax rules (e.g., partial exemption). Exceptions for leasing are similar to purchase: Taxi or instructor leases. If the leased car is used primarily as a taxi, chauffeur hire, or driving instruction, 100% of the VAT on the lease charges is recoverable. Short-term hire. The 50% VAT block does not normally apply where a car is hired for no more than 10 days specifically for business use. However, where the hire simply replaces an ordinary company car that is temporarily off the road, the 50% block applies from the first day of hire. All lease-related charges (rentals, extras, and optional services that aren’t separately invoiced) are subject to the 50% block. If maintenance is charged separately on the lease invoice, its VAT is fully recoverable; only the rental element gets 50% blocked. Get Free Consultation Call Anytime 0203 883 4777 Get Free Consultation VAT on fuel and repairs VAT on Repairs & maintenance Where a vehicle is used for business purposes and the business pays for the work, VAT on repairs and maintenance can normally be reclaimed as input tax. This can apply even where the vehicle is also used privately or VAT was not reclaimed on the vehicle itself. A sole proprietor or partner cannot reclaim VAT on repairs where the vehicle is used solely for private motoring. VAT on accessories fitted at the time of purchase is also blocked where VAT recovery on the car itself is blocked. VAT on Road fuel When a business buys fuel, it can claim VAT but must account for the private use of that fuel. Two main methods exist: Fuel scale charge: Reclaim all VAT on fuel and account for output VAT using the HMRC fuel scale charge, which is based on the car’s CO₂ emissions and the relevant VAT accounting period. HMRC’s current scale charges were updated from 1 May 2026, so businesses should make sure they use the rates applying to their accounting period. Mileage records: Reclaim VAT only on the fuel used for business journeys (proportional claim). Keep detailed logs of business vs private miles and apportion the fuel costs. Alternatively, a business may choose not to reclaim VAT on road fuel. In that case, no output VAT adjustment is required for private fuel use. However, if a business chooses not to reclaim VAT on road fuel, this treatment must apply to all road fuel bought by the business, rather than being selected vehicle by vehicle. Checklist: To maximise VAT recovery, businesses should: Confirm if cars meet any exception (e.g., taxi or pool) before reclaiming VAT. Apply the 50% input VAT block on leased car rentals where applicable. Keep strict mileage records or use the HMRC fuel scale for mixed-use vehicles. Keep all the VAT invoices for car purchases, leases, repairs, and fuel. Maintain a log of each vehicle’s business and private use (dates, mileage, purpose). If a car is sold after claiming VAT, account for output VAT on the sale. Also Read: VAT on Car Hire in the UK – What Businesses Need to Know VAT recovery by vehicle/expense type Vehicle / Expense TypeVAT recoveryKey conditions / notesPurchased car (private+business)0%Not recoverable if there’s any private availability. HMRC blocks VAT on mixed-use car purchases.Purchased car (business-only)100%Recoverable only if the car is exclusively for business use (never made available privately).Pool car (shared vehicle)100%Recoverable if kept on the premises, not allocated to an individual or kept at home.Leased car (private use)50%Only 50% of VAT on lease rentals is recoverable; the rest is blocked.Leased car (taxi/hire/instruct.)100%If used mainly for taxi hire, self-drive rental, or driving instruction, the full VAT on the lease can be reclaimed.Road fuel (mixed use)100%*†All fuel VAT can be reclaimed if using HMRC’s flat-rate fuel scale or accurate mileage split (*see note*).Vehicle repairs/maintenance100%It is recoverable as input tax when the business pays, regardless of any private use. † Fuel scale charge: Businesses can reclaim all VAT on road fuel and then use HMRC’s CO₂-based scale charge to account for private fuel use. Record-keeping and disposal adjustments Invoices: Keep VAT invoices for all car-related costs (purchase, lease rentals, fuel, and repairs). Mileage logs: Record business vs private miles if you do not use the fuel scale. Car policy: Document any restrictions on private use (e.g., a written ban or pool-car rules). If your business sells a car on which VAT was recovered, you must normally account for output VAT on the full selling price. Where VAT was charged on the original purchase but the business was blocked from recovering it, the subsequent sale is generally exempt from VAT. If no VAT was charged when the car was originally purchased, for example because it was bought from a private individual or under the second-hand margin scheme, different rules may apply and the vehicle may be eligible for the VAT Margin Scheme. How We Help You With VAT Recovery on Business Cars At Apex Accountants, we guide businesses through complex VAT rules on company cars and fuel. Our services include: VAT advisory: Advising on reclaim eligibility for purchased or leased vehicles. Compliance reviews: check car and fuel records to maximise lawful VAT recovery. Audit preparation support: Preparing documentation, including invoices, mileage logs and vehicle policies, and assisting with HMRC VAT queries. Where an enquiry becomes more complex, our HMRC tax investigation support can help businesses manage the process. Training & policy setup: Helping firms implement car-use policies and mileage record systems. Our team stays up to date with HMRC notices and UK VAT law, ensuring you reclaim every pound you’re entitled to while remaining fully compliant. YAT recovery on cars and related expenses depends on use and status. Companies should plan vehicle use and keep detailed records to support any claims. Following HMRC’s guidance can prevent common errors and unlock legitimate VAT savings. Need help with VAT recovery on a business car? Contact our VAT specialists for guidance on purchased cars, leased vehicles, fuel costs and VAT record-keeping. Get Free Consultation Call Anytime 0203 883 4777 Get Free Consultation Frequently Asked Questions Can I reclaim VAT on a company car if it is also used privately? VAT on the purchase of a car is generally blocked where the vehicle is available for private use. Full VAT recovery may be possible where the car is used exclusively for business and is not available for private use, or where a qualifying car is used primarily for purposes such as taxi services, self-drive hire or driving instruction. See HMRC guidance on reclaiming VAT on business vehicles How does the 50% VAT rule for leased cars work? Where a qualifying car is leased for business purposes but is also available for private use, the business can normally reclaim 50% of the VAT charged on the lease payments. The remaining 50% is blocked as a proxy for private use, although normal VAT rules such as partial exemption can still affect the amount recoverable. See HMRC’s rules for VAT on leased cars Can businesses reclaim VAT on fuel, repairs and servicing? VAT on business-related repairs and maintenance can normally be reclaimed where the business pays for the work, even if VAT could not be recovered on the vehicle itself. For mixed-use fuel, a business can either reclaim all the VAT and apply the appropriate HMRC fuel scale charge, or reclaim only the VAT relating to business journeys using detailed mileage records. A business can also choose not to reclaim fuel VAT, but this approach must then apply to road fuel for all vehicles used by the business. Read HMRC guidance on vehicle and fuel VAT What evidence shows that a car is used exclusively for business? HMRC considers both how the car is used and whether it is genuinely available for private use. A car qualifying for exclusive business use must be used only for business journeys and must not be available for private use. Supporting evidence can include restrictions on private use, mileage records and details of who has access to the vehicle. Pool cars have additional conditions, including normally being kept at the principal place of business and not being allocated to one individual. Read HMRC’s guidance on exclusive business use and pool cars What happens to VAT when a business car is sold? If VAT was recovered when the car was purchased, the business must normally account for VAT when it sells the vehicle. Where VAT was charged on the original purchase but the business was blocked from recovering it, the subsequent sale is generally exempt from VAT. Where no VAT was charged when the vehicle was purchased, different rules may apply, including possible use of the VAT Margin Scheme. See HMRC guidance on VAT when disposing of motor cars Can businesses reclaim VAT on electric vehicle charging? VAT incurred on charging an electric vehicle can be recovered to the extent that the electricity relates to business use where the vehicle is charged at work or at a public charging point, subject to the normal VAT rules. Businesses should keep mileage records where charging covers both business and private journeys. Where an employee charges an electric vehicle at home, however, HMRC currently treats the electricity supply as being made to the employee, so the employer cannot recover that VAT.
Electricity VAT Cut 2026: What the Six-Month Zero Rate Means from 1 October Posted on 10 August 202611 August 2026 by zaid Najam The government’s announcement, made in July by new Prime Minister Andy Burnham as one of his first acts in office, frames the electricity VAT cut as immediate relief ahead of winter. For households and the businesses that supply or advise them, the detail matters more than the headline figure. Electricity VAT for UK Businesses: Where Apex Accountants Fits In The zero rate runs from 1 October 2026 to 31 March 2027, covering the remainder of the current financial year. It is expected to strip around £45 a year off the typical bill under the Ofgem price cap, and the Treasury puts the cost to the public purse at roughly £850 million for 2026-27, funded by cancelling the planned Digital ID programme rather than fresh borrowing. Whether the relief continues past March 2027 will be decided at the Autumn Budget. Suppliers must apply the reduction automatically, including to customers on fixed-rate tariffs — the change affects the tax component of a bill, not the unit price, so a fixed deal offers no shelter from it. Gas Is Untouched The relief is electricity-only. Domestic and qualifying gas supplies stay on the 5% reduced rate; standard-rated business gas remains at 20%. HMRC’s existing guidance on fuel and power is unchanged in that respect, and there’s no indication the zero rate will extend to heating oil, LPG or other qualifying fuels. Who Benefits from the Electricity VAT Zero Rate The rules on electricity VAT for UK businesses extend beyond ordinary domestic bills, but only for organisations that meet the qualifying conditions: Small businesses below the de minimis threshold, already certified for domestic-use energy VAT relief Charities, in respect of non-business electricity use Residential care homes and similar qualifying premises Organisations relying on a supplier declaration to secure the reduced rate should expect the same mechanism to carry over to the zero rate — worth revisiting where usage is mixed between qualifying and non-qualifying purposes. A Deliberate Gap For Northern Ireland And EV Charging Northern Ireland keeps the 5% rate. Windsor Framework rules tie electricity VAT there to EU law, which the UK cannot amend unilaterally — the executive instead receives equivalent funding. Because the electricity VAT cut 2026 does not extend to Northern Ireland, multi-site operators with premises on both sides of the Irish Sea should budget for bills that diverge from October. A second gap sits with electric vehicles. Under Revenue and Customs Brief 4 (2026), HMRC treats electricity at public charge points as standard-rated because the supply isn’t made to a dwelling. From October, home charging carries no VAT, while public charging still carries 20% — a gap fleets reimbursing mileage should model before winter. Get Free Consultation Call Anytime 0203 883 4777 Get Free Consultation Why the Saving May Look Smaller on the Bill Ofgem’s Energy Price Cap is updated every three months, and the next cap period begins on 1 October, the same day the electricity VAT cut takes effect. MoneySavingExpert has warned that the expected £45 saving could be largely offset by a forecast rise in the October Price Cap. Martin Lewis noted that rising wholesale energy costs could mean many households see little of the headline saving in practice. The £45 figure should therefore be treated as an estimated saving rather than a guaranteed reduction in overall energy bills. Where Apex Accountants Fits In The new VAT rate may affect more than just your electricity bill. Finance teams, care providers, landlords and energy-intensive small businesses may need to update billing systems, review supplier certificates and check how the change is reflected in VAT returns from 1 October. Apex Accountants & Tax Advisors can review your current electricity VAT treatment, confirm whether your organisation qualifies for the Electricity VAT zero rate and identify any areas where reduced or standard rates still apply. We can also help you assess the cash flow impact, review mixed-use energy supplies and prepare the supporting evidence HMRC may require. Contact Apex Accountants today to arrange a free consultation and make sure your organisation is ready for the change. Frequently Asked Questions When does the electricity VAT cut start and end? From 1 October 2026 to 31 March 2027, covering the rest of the current financial year. Does the VAT cut apply to gas as well as electricity? No. Gas stays at the existing rates—5% for qualifying domestic use and 20% standard-rated for business supplies. Will businesses see the zero rate too? Only where they already qualify for domestic-use energy VAT relief, typically small users below the de minimis threshold, alongside charities and care homes. Does Northern Ireland get the same VAT cut? No. Northern Ireland remains on the 5% rate due to Windsor Framework rules; the Executive receives separate compensating funding instead. Will fixed-tariff customers still get the saving? Yes. Suppliers are expected to apply the reduction regardless of tariff type, since it removes tax rather than changing the unit price. Could the price cap rise cancel out the saving? Partially. The Ofgem price cap is reviewed on the same date the cut begins, and a forecast increase may reduce the net benefit below the headline £45 figure.
Changes to Capital Goods Scheme for VAT: What UK Businesses Need to Know Posted on 19 July 202619 July 2026 by Rida Ahmed A client came to APEX last year partway through refurbishing a mixed-use building — offices upstairs, a partly exempt letting downstairs. The spend sat just above the old £250,000 capital goods scheme threshold, which meant ten years of annual VAT adjustments to track and defend. Under the rules that now apply, that same refurbishment would fall outside the scheme entirely. From 29 July 2026, HMRC will raise the Capital Goods Scheme threshold for land, buildings and civil engineering work from £250,000 to £600,000 and will remove computers from the scheme altogether. This is the biggest change to CGS since it was introduced in 1990, and it will pull thousands of smaller property transactions out of a notoriously complex compliance regime. Quick answer: The Capital Goods Scheme (CGS) threshold for land, buildings and civil engineering works rises from £250,000 to £600,000 (excluding VAT) from 29 July 2026. Computers and computer equipment are removed from the CGS entirely from the same date — the old £50,000 threshold no longer applies to them. The change only affects capital expenditure incurred on or after 29 July 2026; anything already committed under contract before that date follows the old rules. It’s made via secondary legislation amending regulations 113 and 114 of the VAT Regulations 1995 (SI 1995/2518) — this is a confirmed HMRC measure, not a consultation proposal. HMRC estimates the change will save affected businesses roughly £0.6 million a year in administrative costs, with negligible Exchequer impact. What is the Capital Goods Scheme for VAT? The Capital Goods Scheme for VAT is an adjustment mechanism that spreads the recovery of input tax on certain high-value assets over several years, rather than allowing a single claim at the point of purchase. It exists to stop businesses over- or under-claiming VAT when the taxable use of an asset changes after acquisition. Under current law, two categories of asset fall within CGS: Land, buildings and civil engineering works, where capital expenditure is £250,000 or more (excluding VAT) — adjusted over 10 successive intervals. Computers and computer equipment, where capital expenditure is £50,000 or more — adjusted over 5 successive intervals. Once an asset is inside the scheme, the business must revisit the VAT recovery percentage every year for the length of the adjustment period, comparing the asset’s actual taxable use against the baseline set in year one. If taxable use rises, HMRC repays more VAT; if it falls, the business repays VAT already claimed. A change of use on disposal within the adjustment period can trigger a single, larger reconciliation covering all the remaining years at once. Businesses that are fully taxable are not automatically exempt from this – a change from taxable to exempt use, such as an office building later let on an exempt basis, can still trigger a clawback even where the business recovers all its VAT elsewhere. Read: VAT on Online Marketplace Sales: What UK Sellers Need to Know About the New HMRC Consultation What’s changing under the Capital Goods Scheme simplification? HMRC is making two specific changes to CGS from 29 July 2026, confirmed in its policy paper on the simplification of the scheme. The threshold for land, buildings and civil engineering works increases, and computers leave the scheme completely. Higher property threshold: the £250,000 trigger for land, buildings and civil engineering works rises to £600,000 (excluding VAT). Expenditure below that level will no longer create a CGS item at all. Computers removed entirely: computers and items of computer equipment are taken out of the scheme’s scope. The old £50,000 threshold and 5-interval adjustment period for computer equipment cease to apply. The legal mechanism is an amendment to Part XV of the VAT Regulations 1995 (SI 1995/2518). Regulation 113(2) is amended to remove the reference to computers and computer equipment, and regulation 113(4) is amended to raise the property threshold, with consequential changes to regulations 113A and 114. When do the new CGS rules take effect? The changes take effect on 29 July 2026 and are not retrospective. Capital expenditure incurred before that date — meaning goods or services already received, or goods already imported or acquired — continues to be governed by the old £250,000 and £50,000 thresholds, even if the asset’s adjustment period runs on for years afterwards. In practice, this means: A property purchase or refurbishment where the tax point falls before 29 July 2026 is tested against the old £250,000 threshold, regardless of when the deal completes on paper. A property purchase or refurbishment where the tax point falls on or after 29 July 2026 is tested against the new £600,000 threshold. Assets already inside CGS under the old rules stay inside CGS and continue their existing adjustment period — the threshold change does not remove them from the scheme retroactively. Businesses part-way through a phased development that straddles the date should take advice before assuming which threshold applies, since the transitional rule is based on when expenditure is incurred, not when the wider project is signed off. How does the higher £600,000 threshold work in practice? A capital project only falls within CGS if its VAT-exclusive cost meets or exceeds the relevant threshold — everything below that line is recovered under normal partial exemption rules with no ongoing adjustment obligation. Here’s how that plays out for a typical partly exempt business. Example: A dental practice buys and fits out a new clinic building for £400,000 (excluding VAT), incurring £80,000 of VAT. Under the current £250,000 threshold, that expenditure falls within CGS, committing the practice to ten years of annual adjustment calculations as its mix of NHS and private (exempt/taxable) work shifts. Under the new £600,000 threshold, the same £400,000 spend falls outside the scheme entirely. The practice recovers VAT once, under its normal partial exemption method, with no ten-year tail of adjustments to monitor or defend at inspection. The same logic applies to refurbishments. A £900,000 refurbishment of an existing building still crosses the new threshold and remains a CGS item in its own right, tracked separately from the underlying property. Businesses working close to £600,000 should model the VAT position before committing to a build contract, since structuring the spend (or timing it either side of 29 July 2026) can determine whether ten years of adjustment obligations apply. Why is HMRC removing computers from the Capital Goods Scheme? HMRC says the computer category has become redundant because the cost of qualifying equipment has fallen well below the £50,000 threshold since the scheme was introduced in 1990, so it is very rarely triggered in practice. Removing it eliminates a compliance obligation that HMRC itself acknowledges delivers little practical benefit for the Exchequer. The wider reform follows a long consultation history. The government launched a Call for Evidence in July 2019, after the 2017 Office of Tax Simplification VAT review flagged CGS as unnecessarily burdensome for smaller businesses. A summary of responses was published in March 2021, and the specific threshold and computer changes were formally announced on 28 April 2025 as part of the government’s Tax Update: Simplification, Administration and Reform work. HMRC’s own impact assessment projects negligible Exchequer cost and estimates ongoing administrative savings for businesses of around £0.6 million a year, concentrated among smaller property owners who previously fell within scope simply because of rising property values. Who is affected by these changes to VAT on capital expenditure? The changes affect any VAT-registered business incurring capital expenditure on land, buildings, civil engineering works, or computer equipment. In practice, the businesses most affected fall into a few groups. Partly exempt businesses — including care providers, financial services firms, education providers and charities — who mix taxable and exempt income and have historically had to track CGS adjustments on modest property purchases. Property investors and developers carrying out refurbishments or fit-outs in the £250,000–£600,000 band, who will now fall outside the scheme altogether. SMEs buying or improving commercial premises, for whom the old threshold had become disproportionate as property values rose since 1990. Any business holding computer equipment previously caught by the £50,000 threshold, which will simply stop being a CGS consideration from 29 July 2026. Wholly taxable businesses are not exempt from the practical effects either — even a fully taxable business can find a change of use (for example, letting out surplus space on an exempt basis) crystallising a CGS liability, so the higher property threshold is a genuine simplification for that group too. Also Read: Getting Your Business Ready for the Summer’s Temporary VAT Cut What should businesses do to prepare? Businesses with capital projects planned for mid-to-late 2026 should establish now whether their expenditure will fall inside or outside CGS once the new threshold applies. Three practical steps matter most. Identify the tax point for any pending land, building or civil engineering spend, since that — not the completion date of the wider project — determines which threshold applies. Review existing CGS records for assets already inside the scheme under the old £250,000 or £50,000 thresholds; these continue on their original adjustment period regardless of the reform. Reassess partial exemption methods where CGS previously drove the choice of method, since removing an asset from CGS can change what special method (if any) is still worthwhile. FAQs About HMRCs Changes To Capital Goods Scheme Does the Capital Goods Scheme only affect partly exempt businesses? No. While partly exempt businesses are most exposed, a fully taxable business can still be caught if the use of an asset later changes — for example, letting out space that was originally used for taxable trading. The scheme is triggered by a change in use, not by a business’s overall VAT status at the time of purchase. What happens if I sell a capital item during the adjustment period? Selling a capital item during its adjustment period crystallises all the remaining years’ adjustments in a single calculation, made in the VAT return covering the sale. If the sale itself is a taxable supply, the remaining intervals are treated as 100% taxable use; if it’s exempt, they’re treated as 0% taxable use, which can produce a significant one-off VAT repayment or claim. Do the new thresholds apply retrospectively to buildings I already own? No. The higher threshold only applies to capital expenditure incurred on or after 29 July 2026. Assets that were already inside the Capital Goods Scheme under the £250,000 or £50,000 thresholds remain inside the scheme and continue their existing adjustment period unaffected. Is this confirmed law or still a proposal? This is confirmed government policy, implemented through secondary legislation amending the VAT Regulations 1995, with an operative date of 29 July 2026 set out in HMRC’s published policy paper. It is not a consultation or draft proposal at this stage, though businesses should always check GOV.UK for the final statutory instrument reference nearer the commencement date. Do I need an accountant for Capital Goods Scheme calculations? Most businesses benefit from professional support, particularly where a project sits close to the £600,000 threshold or where partial exemption percentages fluctuate year to year. Getting the baseline interval wrong, or missing a change-of-use trigger, can lead to VAT assessments and penalties several years after the original purchase. What if my capital expenditure is close to the £600,000 threshold? Where spend is close to the threshold, timing and contract structuring can determine whether the Capital Goods Scheme applies at all. It’s worth taking advice before committing to a build contract, since expenditure incurred just before 29 July 2026 is tested against the old £250,000 limit even if the wider project completes later. Next steps If you’re planning capital expenditure on property, refurbishment or equipment in the run-up to this change, it’s worth reviewing the VAT treatment before contracts are signed rather than after. Apex Accountants & Tax Advisors works with property owners, developers and partly exempt businesses across the UK to assess Capital Goods Scheme exposure, structure capital projects efficiently and manage existing CGS adjustment schedules. Book a consultation with our VAT team to review your position ahead of the 29 July 2026 change.
UK VAT Group Advice After Barclays Ruling Raises Concerns Posted on 14 July 202614 July 2026 by Rida Ahmed A recent Upper Tribunal ruling has increased demand for UK VAT group advice by casting doubt over the terms on which international businesses can access UK VAT grouping, raising concerns that a structural advantage the UK has long promoted to attract overseas investment may be quietly eroding. The decision, handed down on 8 June 2026 in Barclays Services Corporation & Anor v HMRC [2026] UKUT 211 (TCC), dismissed an appeal by a US-incorporated company that sought to join its UK affiliate’s existing VAT group. The judgement turned primarily on whether the company’s UK branch qualified as a “fixed establishment” at the time of the application. The tribunal concluded it did not. Tax advisers say the implications reach well beyond one bank’s corporate structure. Why UK VAT group advice matters after Barclays Before examining the ruling, it is important to understand the implications. Under section 43 of the Value Added Tax Act 1994, two or more commonly controlled corporate bodies can apply to be treated as a single taxable entity for VAT purposes. The immediate benefit is straightforward: supplies between members of the group are disregarded for VAT. No VAT is charged on intra-group transactions, and no compliance is required on those supplies. For businesses that make largely exempt supplies, such as financial services and insurance firms, this matters significantly. Because they cannot recover the VAT they incur on services they receive, any VAT charged on intra-group services becomes a permanent, irrecoverable cost. VAT grouping eliminates this. The UK’s approach has historically been described as relatively permissive compared to EU member states. For overseas companies wishing to join a UK VAT group, the key condition is that the company must have a “fixed establishment” in the UK — meaning a genuine operational presence with sufficient human and technical resources available to it. What the Barclays Case Was About Barclays Services Corporation (BSC) is a Delaware-incorporated company that provides shared services to other Barclays entities worldwide, including Barclays Execution Services Limited (BESL) in the UK. BESL is the representative member of the Barclays UK VAT group. As part of a broader regulatory restructuring, BSC registered a UK branch in July 2017. VAT planning was openly identified as a key driver. BESL applied for BSC to join the VAT group on 1 December 2017, with internal documentation indicating a one-off benefit of £21 million was available if the branch was operational before year-end. HMRC refused the application on two grounds. First, it said BSC had no fixed establishment in the UK at the date of the application. Second, and in the alternative, it argued that refusing admission was “necessary for the protection of the revenue”, a power HMRC holds under the legislation. The First-tier Tribunal upheld HMRC’s refusal in August 2024. The Upper Tribunal, after hearing the case in March 2026, issued its judgement on 8 June 2026 and dismissed the appeal. The full decision is published on GOV.UK. Why BSC failed the VAT group fixed establishment test The Upper Tribunal found that BSC’s UK branch was, in the tribunal’s own word, “skeletal” at the time of the application. The key findings were the following: UK-based staff were not employed by BSC directly The branch lacked ownership or comparable control over those employees The branch did not control the premises or technical systems it used The resources associated with the branch had initially been attributed to BESL, not to BSC A fixed establishment, the tribunal confirmed, requires more than a registered address or a Companies House filing. It requires the permanent presence of both human and technical resources that are genuinely controlled by and available to the overseas entity. Having costs attributed to a UK affiliate while the branch itself is being set up does not satisfy that test. The Upper Tribunal added obiter comments — observations that were not strictly necessary for the outcome — that the bar for what qualifies as a fixed establishment may have been set too low in earlier cases. These remarks are not binding, but they are significant. Get Free Consultation Call Anytime 0203 883 4777 Get Free Consultation The ‘Protection of the Revenue’ Question The second ground raises a broader concern. HMRC can refuse a VAT grouping application where it considers the refusal “necessary for the protection of the revenue”. The Upper Tribunal, while not required to decide the point given its conclusion on fixed establishment, indicated that HMRC could reasonably have refused the application on this ground as well. The reasoning was that the anticipated VAT savings were very considerable, the branch’s substance on the application date was minimal, and the timing of the application had been expressly driven by the opportunity to capture a one-off pre-year-end tax saving that was described internally as a “financial imperative”. This is the part of the judgement that has attracted most concern from advisers. Abigail McGregor, a tax lawyer at Pinsent Masons, said the obiter comments on the protection of revenue would concern businesses. “The suggestion that there might be a test weighing substance against the amount of savings is especially concerning, as it introduces a level of uncertainty that will no doubt impact the entire industry,” she said. What This Means in Practice The immediate effect is clear. Overseas companies looking to join a UK VAT group must demonstrate real, controlled presence in the UK. A branch registration alone is insufficient. The substance must exist at the time of the application — not merely be anticipated. The wider concern is different. If HMRC can refuse a grouping application on the basis that the VAT savings are large relative to the branch’s substance, even where a fixed establishment technically exists, the protection of the revenue power becomes a more significant constraint on VAT group planning than many businesses had previously assumed. Several other cases are currently stayed behind the Barclays appeal. Their outcome will depend on their individual facts, but the Barclays decision provides the framework against which they will be assessed. The potential business impact falls into three categories: For existing cross-border VAT groups: Businesses should review whether their overseas member entities continue to satisfy the fixed establishment test. Circumstances change. A branch that was adequate when the group was formed may not meet the standard today, and HMRC has the power to direct that a company leave a group. For businesses planning to restructure: The Barclays case illustrates the risk of applying for VAT grouping before the operational substance is fully in place. HMRC can scrutinise the timing of an application and the documented rationale for it. Internal communications that describe the purpose of a restructuring will be relevant. For partially exempt businesses: Financial services firms, insurers, and others that cannot fully recover input VAT face the greatest practical exposure. For these businesses, the irrecoverability of VAT on intra-group services is a real cash cost. The ability to form a VAT group is not a planning luxury but a commercial necessity. Cross-border VAT group advice after Barclays The ruling comes against a backdrop of shifting HMRC policy on international VAT grouping. In November 2025, HMRC reversed its position on cross-border VAT grouping related to EU branches, restoring what is known as the “whole establishment” principle. That change, announced at the 2025 Autumn Budget, meant that services between a UK head office and an overseas branch are once again disregarded for VAT purposes under the intra-entity rules, even if the branch belongs to a VAT group in a different country. The ICAEW confirmed this in its Budget commentary. That was a positive development for many international groups. The Barclays decision represents a countervailing pressure, tightening the conditions on which foreign subsidiaries and group service entities can be admitted to UK VAT groups in the first place. How Apex Accountants & Tax Advisors Can Help The Barclays decision is a practical reminder that VAT grouping, often treated as a one-time administrative matter, requires ongoing review. Eligibility conditions can change. HMRC’s approach to those conditions is evolving. And the consequences of getting it wrong can be significant. Apex Accountants & Tax Advisors works with businesses, including multinational groups and partially exempt organizations, to: Review the fixed establishment position of overseas entities currently within or seeking to join a UK VAT group Assess the protection of the revenue risk for applications where anticipated savings are substantial relative to the branch’s operational substance Advise on VAT group structuring ahead of corporate restructuring, M&A, or regulatory change Support responses to HMRC enquiries into existing VAT group arrangements Review intra-group service contracts for VAT treatment, including where deferred payments or performance-based fees are involved Provide cross-border VAT group advice on the interaction between the whole establishment rules and domestic VAT grouping The VAT grouping rules are among the more complex areas of indirect tax. Early UK VAT group advice, before a restructuring or application proceeds, avoids the difficulties created when operational and tax planning run on different timelines. Contact Apex Accountants today to review your VAT group position. Book a free consultation with one of our specialist indirect tax advisers. Get Free Consultation Call Anytime 0203 883 4777 Get Free Consultation Frequently Asked Questions What is a UK VAT group and who can join one? A UK VAT group allows two or more commonly controlled corporate bodies to be treated as a single taxable entity. Supplies between group members are disregarded for VAT. To join, each company must be established or have a fixed establishment in the UK and must be under common control with the other members. The rules are set out in section 43 of the Value Added Tax Act 1994. HMRC guidance is available at GOV.UK: VAT registration groups. What is the VAT group fixed establishment test? A fixed establishment requires a genuine operational presence in the UK, with sufficient human and technical resources that are controlled by and available to the overseas entity. A registered branch, a Companies House filing, or premises used by a related UK company do not in themselves constitute a fixed establishment. The test is highly fact-sensitive. The Barclays ruling confirmed that resources attributed to a UK affiliate, rather than directly to the overseas branch itself, do not satisfy the requirement. Can HMRC refuse a VAT grouping application even if conditions are met? Yes. Under the Value Added Tax Act 1994, HMRC has the power to refuse an application if it considers that refusal is “necessary for the protection of the revenue”. The Upper Tribunal in Barclays indicated this power could be exercised where anticipated VAT savings are large relative to the substance of the entity seeking to join and where the application appears primarily driven by tax savings rather than commercial reorganisation. This power is exercised on a reasonableness standard, meaning HMRC’s decision can be challenged but only where it could not reasonably have been satisfied that the grounds existed. Does the Barclays ruling affect existing VAT groups? Not directly. The case concerned a refusal to admit a new member. However, HMRC also has powers to direct that a body leave a VAT group and can terminate grouping where it considers this necessary. Businesses with overseas entities in their VAT groups should review whether those entities continue to meet the fixed establishment test, particularly if the operational circumstances of the branch have changed since the group was formed. What is the “protection of the revenue” power, and how far does it extend? The protection of the revenue power allows HMRC to refuse or terminate VAT grouping where it believes a significant revenue loss would otherwise result. The Upper Tribunal’s comments in Barclays suggest that where the scale of anticipated savings is disproportionate to the substance of the applicant, this power could be exercised even where the fixed establishment test is technically met. These comments were obiter and are not legally binding, but they indicate the direction in which HMRC’s approach may develop. What should businesses do now? Businesses with cross-border VAT group arrangements should carry out a structured review of the fixed establishment position of any overseas members, check that operational substance is adequate and documented, and review the rationale for current grouping arrangements in light of the Barclays decision. Where a VAT group application is planned, the substance of the applicant entity should be established before the application is made, not as an anticipated future development.
VAT on Online Marketplace Sales: What UK Sellers Need to Know About the New HMRC Consultation Posted on 13 July 202613 July 2026 by Farazia Gillani UK-based sellers trading on Amazon, eBay, Etsy and similar platforms could soon find themselves subject to a very different VAT system. A new joint consultation from HM Treasury and HMRC is looking at whether online marketplaces should become liable for VAT on domestic seller sales, not just on sales made by overseas traders. If this goes ahead, it would be one of the biggest shifts in UK marketplace VAT since the 2021 reforms. Here’s what’s actually being proposed, who it affects, and what sellers should be doing about it now. What Is the Online Marketplace VAT Liability Consultation? The consultation, titled Extending VAT Online Marketplace Liability to Combat Non-Compliance, opened on 23 June 2026 and runs for eight weeks, closing at 11:59pm on 18 August 2026. It’s a joint project between HMRC and HM Treasury, and it sits within a wider package of 40 tax measures announced by the Exchequer Secretary to the Treasury on the same date. At its core, the proposal would extend online marketplace VAT liability rules beyond overseas sellers and low-value imports, making platforms responsible for accounting for VAT on certain sales made by UK-established businesses too. No implementation date has been set. If the government decides to proceed, a further technical consultation on draft legislation would follow before anything becomes law. Why Is the Government Doing This? The short answer: money and fairness. HMRC estimates that tens of thousands of UK-based businesses trading through online marketplaces aren’t meeting their VAT obligations, with the resulting non-compliance running into the hundreds of millions of pounds each year. The concern isn’t really about VAT rates or new taxes. It’s about levelling the playing field. Sellers who dodge VAT can undercut competitors who charge it correctly, whether those competitors trade online or from a high street shop. The government has said any additional revenue raised would be channelled back into support for high street businesses through changes to the business rates system. This builds on the 2021 reforms, which made marketplaces liable for VAT on: sales by overseas sellers with goods already in the UK at the point of sale low-value imports of £135 or less, where the goods are outside the UK when sold Those changes worked well for overseas non-compliance. What they didn’t fix was VAT leakage among UK-based sellers, and that’s the gap this new consultation is trying to close. Read: The Complete Tax Guide for Online Sellers in the UK – Amazon, Vinted, eBay, and Etsy How Does Marketplace VAT Work Right Now? Before looking at what might change, it helps to understand the current rules. ScenarioWho accounts for VAT todayOverseas seller, goods already in the UK at saleThe marketplaceGoods outside the UK, consignment value £135 or lessThe marketplaceGoods outside the UK, consignment value over £135Normal import VAT and customs rules applyUK-established seller, goods in the UK at saleThe sellerSale to a UK VAT-registered business customer with a valid VAT numberThe business customer accounts for VAT in the relevant low-value import scenario A platform only counts as an “online marketplace” for VAT purposes if it does all three of the following: sets the terms of sale processes or enables payment is involved in ordering, delivery, or facilitating delivery Platforms that simply run adverts, process payments only, or redirect buyers elsewhere aren’t caught by these rules. Get Free Consultation Call Anytime 0203 883 4777 Get Free Consultation What Would Actually Change for UK Sellers? This is the part that matters most to domestic sellers. Under the proposal, marketplaces would become liable for VAT on business-to-consumer sales made by UK-established sellers, where the goods are already in the UK at the point of sale. Technically, this would work through a deemed supply structure: the seller would make a zero-rated supply to the marketplace, and the marketplace would then charge VAT to the end customer and account for it on its own VAT return. A few things the proposal makes clear: It’s aimed at B2C sales only — business-to-business transactions are out of scope. It would not change VAT rates on any goods. Zero-rated items stay zero-rated. Sales through a seller’s own website or physical shop would be unaffected — the seller would keep accounting for VAT on those as normal. Input tax recovery would continue under the usual rules. For information on the trading allowance, do read: How to Use the £1,000 Trading Allowance When Selling on Vinted, eBay & Other Platforms Who Would Be Protected? The Threshold Question HMRC faces one of the trickiest challenges in this proposal: preventing the rules from affecting small sellers who do not need to register for VAT. HMRC is consulting on two main options: Option 1: A Minimum Platform Threshold A marketplace would only become liable for a seller’s VAT once that seller’s sales on that specific platform pass a set value. The lead suggestion is £90,000 — the same as the standard UK VAT registration threshold — though a lower figure is also being considered, since £90,000 per platform could still leave gaps for sellers who spread sales across several marketplaces. Option 2: A VAT rate relief Instead of a threshold, smaller UK businesses below the VAT registration threshold could get some form of rate relief on their marketplace sales. Neither option is confirmed. The consultation is genuinely asking for input on which approach works better in practice, and it’s a question sellers close to the threshold should watch closely. It’s also worth being clear about what stays the same: the standard UK VAT registration threshold remains more than £90,000 of taxable turnover across all sales channels combined. A platform-specific threshold, if introduced, wouldn’t replace that underlying obligation. Get Free Consultation Call Anytime 0203 883 4777 Get Free Consultation Who’s Excluded From the Proposed Rules? Private and casual sellers: Individuals selling personal possessions, not operating as a business, aren’t intended to be caught by any of this. Second-hand goods sellers — possibly: This one is still unresolved. UK businesses using the Second-hand Margin Scheme calculate VAT on the margin between purchase and sale price, which doesn’t fit neatly into a marketplace deemed-supply model. HMRC is weighing up whether to exclude second-hand sales entirely or find another way to handle them. Takeaway and Food Delivery Platforms Are Explicitly in Scope This isn’t just an e-commerce goods story. The consultation specifically names takeaway food delivery platforms, restaurants, fast food kitchens and takeaway outlets as relevant businesses. For platforms that only operate within the UK and haven’t previously had to deal with the overseas-seller marketplace rules, this could be a much bigger operational shift than for the likes of Amazon or eBay, which already run complex VAT logic for international sellers. What About the Flat Rate Scheme? The consultation directly asks about the impact on businesses using the VAT Flat Rate Scheme. If marketplace sales move to a deemed-supply model where the platform accounts for VAT, sellers on the Flat Rate Scheme could effectively lose the ability to apply their flat rate percentage to that portion of turnover. Businesses using the Flat Rate Scheme with a significant share of marketplace sales should review the impact early, as this remains an open issue rather than a confirmed rule. A detailed tax guide for eBay sellers: eBay HMRC UK Tax Rules Every Seller Should Know What Should Sellers and Their Accountants Do Now? There’s no new law yet — this is still a consultation, and the response period runs until 18 August 2026. But that’s exactly why now is the sensible time to check exposure, rather than waiting for the outcome. A practical short-term checklist: List every marketplace the business sells through Break down turnover by platform, not just as a single total Separate B2C sales from B2B sales Check how close turnover is to the £90,000 VAT threshold Review whether the business uses the Flat Rate Scheme Flag any second-hand goods activity Note which sales come through the business’s own website, since these stay outside the marketplace model Prepare for more marketplace onboarding checks and data requests going forward Review AreaWhy It MattersVAT registration statusBoth the standard threshold and the proposed platform threshold sit at £90,000Marketplace turnover by platformThe lead proposal is based on sales per platform, not combined turnoverSales channel splitWebsite and shop sales stay under the current model; marketplace sales could shiftB2C vs B2B splitOnly B2C marketplace sales are in scope of the proposalSecond-hand goodsTreatment is still undecided because of the Margin SchemeFlat Rate Scheme useDirectly flagged as an area HMRC wants evidence on How We Help You Deal With the VAT on Online Marketplace Sales and the Proposed Changes At Apex Accountants, we work with online sellers, e-commerce businesses and marketplace traders across Amazon, eBay, Etsy and food delivery platforms to keep their VAT position under control — including ahead of policy changes like this one. Our support covers: VAT registration reviews for e-commerce and marketplace sellers Turnover analysis broken down by platform and sales channel B2C and B2B VAT mapping for mixed-channel businesses Flat Rate Scheme impact reviews Second-hand goods and Margin Scheme reviews Marketplace VAT compliance checks for Amazon, eBay, Etsy and similar platforms Support with preparing and submitting responses to the HMRC consultation If you sell through an online marketplace, the sensible move isn’t to wait for the final rules — it’s to understand exactly where your VAT exposure sits today. Get Free Consultation Call Anytime 0203 883 4777 Get Free Consultation Conclusion This is still a consultation, not a finished piece of legislation, and the final shape of any changes won’t be clear until after 18 August 2026. But the direction of travel is unmistakable: HMRC wants marketplaces to take on more VAT responsibility for UK-based sellers, not just overseas ones and low-value imports. VAT-registered sellers may find that platforms, rather than sellers themselves, account for VAT on marketplace sales. Smaller sellers need to assess whether the final rules introduce a suitable threshold or relief. Sellers can strengthen their position by reviewing VAT registration status, platform-by-platform turnover, sales channel mix and Flat Rate Scheme use before the rules take effect. Common Questions From UK Marketplace Sellers Will this affect my Amazon, eBay or Etsy account? Potentially, yes. The proposal applies to qualifying online marketplaces that facilitate B2C goods sales. It is not limited to specific platforms and could affect sellers using major marketplace channels. Does this affect sales through my own website? No. The proposal currently focuses on marketplace sales only. VAT obligations for sales made through your own website, physical shop or direct channels would continue under existing rules. What if my turnover is under £90,000? This remains an important area under consultation. Possible protections include a Minimum Platform Threshold or VAT rate relief, but the final approach has not been confirmed. Will marketplaces ask for more information from sellers? Yes, sellers may need to provide more details. Platforms could review business location, marketplace turnover, seller status, and whether goods are new or second-hand. Are business-to-business sales included? No. The proposed changes focus on business-to-consumer sales of goods. B2B transactions are outside the main scope of the proposed marketplace VAT liability rules.
Getting Your Business Ready for the Summer’s Temporary VAT Cut Posted on 4 June 20264 June 2026 by Farazia Gillani A temporary VAT cut of 5% will apply from 25 June 2026 to 1 September 2026 on certain children’s meals, children’s and family tickets, and admission to qualifying family attractions. Preparing your systems, menus, ticket types, and records before 25 June will make summer trading smoother and autumn VAT returns easier to manage. At Apex Accountants, we treat the task as a sales-mapping job first and a VAT-return job second. Knowing exactly which items qualify makes a busy summer manageable. What You Need To Know About The Summer VAT Cut The 5% VAT cut replaces the standard 20% rate for qualifying sales during the relief window and applies across the UK. The 5% VAT relief covers three main areas: Children’s meals sold only as children’s meals and eaten on the premises Children’s tickets for cinemas, theatres, concerts, exhibitions, and shows Admission to attractions suitable for families, including adult admissions when part of a qualifying family package A theme park ticket for adults can fall within the temporary 5% rate, but an adult-only cinema ticket does not; for cinemas and theatres, the relief focuses on children’s tickets and family packages. Examples of possible reductions if the full saving is passed on include: £20 off family theme park tickets £11 off family aquarium tickets £2 off children’s meals If your business is not VAT-registered, this is not a rate change you can apply in the usual way. Read: Everything About VAT Return Deadlines in the UK Temporary VAT Cut – Which Sales Qualify and Which Do Not Sale TypeTemporary RateNotesChildren’s meal on a dedicated menu, on site5%Must be held out for sale only as a meal for childrenFixed-price children’s meal including drink/dessert5%Whole package qualifies if sold as one mealSmaller adult portion sold cheaplyNormal rateNot eligibleTakeaway children’s mealNormal rateTakeaways do not qualifyChildren’s cinema/theatre ticket5%Must be marketed, priced, and presented as a children’s ticketAdult cinema/theatre ticket sold on its ownNormal rateAdult-only admissions stay standard-ratedFamily cinema/theatre ticket including at least one child5%Whole family package can qualifyGeneric group ticket not sold as family ticketNormal rateDoes not qualifyZoo, soft play, museum, or theme park admission5%Applies to the right of admission onlyFood, merchandise, or upgrades sold separatelyNormal rateOnly admission charge is reducedSports event entry, facility use, or participationNot coveredExcludedSeason/repeat-entry passes beyond relief periodUsually not coveredOnly fully qualifying passes within period count The key is not who buys the item, but how it is sold. Items must be marketed, priced, and presented as intended for children. A proper children’s menu is stronger than simply offering “small plates” from the adult menu A clear “family ticket” is safer than a vague multi-buy group ticket Non-alcoholic drinks included in a children’s meal can qualify. Meals including alcohol or separately priced extras from the standard menu remain standard-rated. Admission is only reduced where it would otherwise be standard-rated. Exempt admissions are not affected. Get Free Consultation Call Anytime 0203 883 4777 Get Free Consultation How to Prepare Pricing, Tills, and Records Start with your stock codes and ticket codes rather than marketing. Your point-of-sale system must separate 5% sales from standard-rate sales. Staff should operate the system correctly, even during busy periods. Keeping daily gross takings by rate, adjustments, and working papers will help manage VAT efficiently. Practical Steps List every potentially affected item — children’s meals, child tickets, family tickets, adult attraction tickets, bundles, and passes Rename anything unclear to match eligibility Program separate codes for 5% and standard-rate sales Test mixed baskets such as adult ticket + child ticket + merchandise, or children’s meal + extra standard-menu item Check website wording and online booking flows to ensure descriptions match tax treatment Decide your pricing approach now to avoid mid-summer changes Diary the switch-back date so rates return to normal after 1 September Ensure receipts and VAT invoices show tax points, item descriptions, and rates VAT-inclusive pricing fractions: 1/6 for 20% and 1/21 for 5%, which affects the tax element inside a gross price. Also Read: VAT on Car Hire in the UK – What Businesses Need to Know Summer VAT Cut on Booking and Bundle Considerations Tickets bought for dates after 1 September remain standard-rated Prepaid tickets for dates within the relief window can be adjusted; credit notes may be needed Bundles (admission + meal + merchandise) must be split; only the qualifying portion can get 5% Season passes covering dates outside the relief period usually do not qualify How We Help Small Businesses Take Advantage of The 5% VAT Relief Apex Accountants helps small businesses implement clean processes for VAT changes. We assist with: Reviewing menus, ticket types, and family packages for eligibility Mapping 5% and standard-rate items in tills, EPOS, and booking systems Checking advance bookings, prepayments, and credit-note adjustments Reviewing invoices, receipts, and bookkeeping records for mixed-rate sales Preparing supporting schedules for VAT returns Get Free Consultation Call Anytime 0203 883 4777 Get Free Consultation Conclusion The summer relief is useful, but it is narrow. The main focus is on how items are sold, whether the sale is really a qualifying meal or admission, and when the right of admission actually falls, so small businesses should prepare around those three tests first. The best plan is this: sort your qualifying items, fix your till and online checkout, test mixed transactions, and set a reminder for the switch back after 1 September. Done early, this is manageable; left late, it becomes a front-desk problem in the middle of your busiest weeks. FAQs on 5% VAT Cut Does the temporary 5% VAT rate start on 25 June 2026? Yes. The official relief window runs from 25 June 2026 to 1 September 2026 inclusive. Is the relief available across the whole UK? Yes. The official fact sheet states that it applies in England, Wales, Scotland and Northern Ireland. What counts as a children’s meal? It must be held out for sale only as a meal for children and supplied by a restaurant, café or similar establishment for consumption on the premises. The key test is how it is marketed, presented and priced, not simply who eats it. Does takeaway food qualify for a temporary VAT cut? No. The detailed brief is clear that takeaway meals do not qualify for this temporary reduced rate. If I sell a smaller adult portion, can I treat it as a children’s meal? Not automatically. Smaller portions, lower-calorie options and discounted adult meals are specifically excluded unless they are genuinely sold as children’s meals. Do adult cinema or theatre tickets qualify for 5% VAT? Not when sold on their own. For cinemas, theatres, concerts, exhibitions and shows, the relief applies to children’s tickets, and adult admissions remain standard-rated unless they are part of a qualifying family ticket. Do family tickets qualify even if they include adults? Yes, where the ticket is sold as a family admission that includes one or more children. In that case, the whole family package can qualify. Which attractions are covered? The official list includes attractions such as theme parks, fairs, circuses, adventure parks, museums, zoos, aquariums, wildlife parks, farm visitor attractions, soft play and observation attractions. The reduced rate applies only to the right of admission, not to separately sold food, merchandise or upgrades. Are sports events or sports facilities included? No. The relief does not apply to admission to sports events, use of sports facilities, or participation in recreational sport. What if customers booked early or bought a pass? For admissions, what matters is the date of admission within the relief window. Advance sales can use the lower rate under the existing change-of-rate rules, but tickets for admission on or after 2 September 2026 stay standard-rated, and many season or repeat-entry passes running beyond the relief period will not qualify.
Court of Appeal ruling puts VAT on education grants under scrutiny Posted on 18 May 202610 July 2026 by Farazia Gillani The UK Court of Appeal has clarified the VAT treatment of education grants, marking an important shift for schools, universities, and training providers. The decision resolves longstanding uncertainty regarding when grants are subject to Value Added Tax and provides clear guidance for finance teams across the education sector. The ruling focuses on whether funding should be considered payment for a supply of services, with potential implications for both current and historic grants. Understanding the Court of Appeal Ruling The Court examined whether certain education grants are consideration for taxable supplies. It concluded that grants tied to delivering a specific service, programme, or outcome may be treated as taxable. Conversely, unconditional grants with no connection to service delivery remain outside the scope of VAT. This aligns with the broader principle set out in HMRC guidance that VAT liability depends on the economic reality of the transaction, not just its label (HMRC VAT Notice 700). The ruling emphasises that conditional grants—those that require measurable outcomes—can create a supply of services. If a provider receives funds contingent on delivering education or training, HMRC may consider it a supply for VAT purposes. Unconditional grants, such as general operational funding without service obligations, remain non-taxable. This clarification helps organisations assess which types of funding are now subject to VAT liability. Implications for Education Providers The decision affects a wide range of institutions, including: State-funded schools and colleges: Targeted grants for specific programmes may now attract VAT, making the education grant VAT rules for schools particularly relevant. Higher education institutions: Research grants or subsidised courses funded by councils or private sponsors may be taxable if they are linked to outcomes. Vocational training providers: Apprenticeships or short courses funded conditionally may fall under VAT if tied to service delivery. Providers must evaluate grant agreements carefully to determine VAT treatment. The ruling also signals that HMRC may scrutinise conditional funding more closely during audits. Accounting teams need to distinguish between taxable and non-taxable funding to ensure accurate reporting and compliance with the VAT Act 1994. Get Free Consultation Call Anytime 0203 883 4777 Get Free Consultation Practical Steps for Compliance Finance teams should take several practical measures to remain compliant: Review grant agreements: Identify grants with conditions tied to service delivery. Update accounting processes: Ensure VAT treatment is accurately reflected in ledgers and returns. Train staff: Ensure finance teams understand the new rules to avoid misreporting. Seek professional guidance: Complex arrangements or historic grants may require expert interpretation. Failure to comply with the VAT rules can result in penalties, interest, and potential audits. This Court ruling is a reminder that conditional grants are treated based on substance, not form, emphasising the necessity for proactive assessment. Strategic Considerations for Directors and Finance Teams Directors and finance teams should consider: Maintaining detailed records of conditional funding and related outputs. Confirming whether grants trigger VAT or remain outside the scope. Consulting tax professionals for any grant arrangements involving measurable obligations. Reviewing historic grants that may now require VAT adjustments. The Court’s decision reinforces the principle that VAT is applied based on the economic substance of a transaction. Conditional grants represent a taxable supply if tied to the delivery of services, whereas unconditional funding remains exempt. This nuanced approach ensures that institutions account for VAT correctly and reduces the risk of HMRC challenges. Apex Accountants & Tax Advisors: Supporting Education Providers Apex Accountants & Tax Advisors can provide VAT guidance for education providers reviewing revised rules and seeking to reduce unintended liabilities. Our services include: Reviewing grant agreements to identify potential VAT liabilities. Advising on proper VAT accounting for conditional grants. Preparing accurate VAT returns and liaising with HMRC if required. Implementing systems to track funding and associated tax obligations efficiently. By integrating these practices, education providers can minimise exposure to VAT liabilities, maintain compliance, and focus resources on delivering educational outcomes. Contact us today to get started! Get Free Consultation Call Anytime 0203 883 4777 Get Free Consultation FAQs Q1: Are all education grants now subject to VAT?No. Only grants that are linked to the delivery of a service, programme, or specific outcomes may be considered taxable. Unconditional grants, such as general operational funding or scholarships with no performance requirements, remain outside the scope of VAT. This distinction is crucial for finance teams when assessing VAT liabilities on both current and historic grants (HMRC VAT Notice 700). Q2: How can providers determine if a grant is taxable?Providers should carefully review each grant agreement to check for conditions that create a supply of services. Factors include: Whether funding is conditional on delivering a specific course, programme, or measurable educational outcome. Reporting or performance obligations tied to the grant. Any requirement to provide services directly to students, sponsors, or government bodies. For complex arrangements, VAT guidance for education providers is recommended to avoid misclassification and support compliance with VAT law. Q3: What are the consequences of incorrect VAT treatment?Misreporting VAT can have serious financial and compliance implications, including: Payment of backdated VAT on amounts incorrectly treated as exempt. HMRC penalties and interest charges. Increased scrutiny in future audits, particularly for conditional grant funding. Education providers should ensure that VAT accounting accurately reflects the economic substance of each grant to mitigate these risks (HMRC VAT Compliance). Q4: Does this ruling apply to historic grants?Yes. Grants received in the past may need reassessment if their VAT treatment was previously unclear. This is particularly relevant for conditional funding received over the last several years, where performance obligations or outcomes were linked to the payment. Providers may need to adjust accounting records, submit amended returns, or consult HMRC to confirm the correct treatment. Q5: What practical steps should providers take to remain compliant? Maintain clear documentation for all grants, including contracts, correspondence, and conditions. Regularly review grant agreements for VAT implications before accepting or recognising income. Train finance and administrative staff on conditional vs unconditional grants, including VAT rules for education grants in schools where funding is tied to specific outcomes. Seek professional advice for complex arrangements or when in doubt to ensure proper VAT reporting.
VAT Payroll Fraud Case Ends in Heavy Prison Sentences Posted on 29 April 202629 April 2026 by Farazia Gillani The VAT payroll fraud case in brief On 21 April 2026, a Scottish court case ended with four prison sentences after a long-running VAT payroll fraud that diverted £8,831,124 in tax. Official case material shows the fraud ran from September 2015 to June 2017 and used a network of companies, including Linear Services, to bill clients for payroll services, collect VAT, and then keep that money instead of paying it over. The companies involved generated about £52 million in combined sales. The case was not treated as a paperwork error or a technical filing issue. The sentencing statement records deliberate evasion, significant planning, and a serious organised crime aggravation. Official summaries also show that the money was moved through bank accounts to the offenders, associates and family members, then spent on luxury goods, holidays and overseas property plans. Scottish VAT Fraud Gang’s Sentences at a glance The total prison time imposed was more than twenty-two years. Leslie Thompson — found guilty after trial and sentenced to 7 years. Graeme Cullen — found guilty after trial and sentenced to 6 years. Graham Newall — found guilty after trial and sentenced to 5 years and 6 months. Martin Lang — pleaded guilty to an amended charge during the trial and was sentenced to 4 years. Key factDetailVAT loss£8,831,124 was fraudulently evaded. Period of offendingSeptember 2015 to June 2017. Business scaleThe network collected VAT from clients through about £52 million of combined sales. Next financial stepConfiscation action is due to follow under proceeds-of-crime powers. The published sentencing remarks also make clear that the lead sentence was 7 years, which was the maximum available for this offence as committed before 22 February 2024. Get Free Consultation Call Anytime 0203 883 4777 Get Free Consultation How the Scottish VAT fraud gang operated In simple terms, the arrangement worked like this: Payroll services were supplied to clients, and invoices included VAT. Over a 21-month period, the VAT was collected but not paid out. The money was then redistributed through bank accounts and used for personal spending rather than tax compliance. Official court material lists the spending in striking detail. It included: gold bullion, diamonds luxury cars clothes expensive watches Holidays racing trips and , plans for a high-end overseas property development. The sentencing statement describes a scheme built on organisation, planning and sustained dishonesty over a lengthy period. It also records that the money should have gone towards frontline services but was instead used to support private lifestyles. What businesses should learn from VAT payroll fraud case This payroll fraud case matters because it shows how ordinary-looking payroll arrangements can hide serious VAT risk. Employers and agencies should understand exactly what they are buying: labour only, payroll services only, or labour with payroll services. That distinction affects the VAT treatment and helps businesses test whether invoices make commercial and tax sense. The core checks are practical: Verify the supplier’s VAT registration. Confirm who actually holds the workers’ employment contracts. Ask for evidence of Real Time Information submissions and tax payments. Keep a detailed record of every check completed. The red flags businesses should not ignore: savings on payroll or labour costs that look too good to be true a payroll company asking an established business to transfer staff into it unusual third-party payment arrangements a supplier with no real office or online presence a payroll company with a name that closely resembles the end business There is also a direct VAT consequence for businesses higher up the chain. If workers’ contracts are shifted into a fraudulent company, recovered VAT may be denied, and VAT already reclaimed may need to be repaid. Separate labour-supply-chain guidance adds that links to non-compliant suppliers can create both financial and reputational damage. How We Help Businesses Stay VAT Compliant For businesses that want tighter controls after cases like this, our services focus on: VAT reviews for outsourced payroll and labour arrangements supply-chain due diligence for agencies, contractors and end clients invoice and contract checks to test whether VAT treatment is correct support with VAT corrections, disclosures and compliance queries practical record-keeping systems that stand up to scrutiny Get Free Consultation Call Anytime 0203 883 4777 Get Free Consultation Conclusion This case ended with lengthy prison sentences because the conduct was deliberate, organised and sustained. More than £8.8 million in VAT was dishonestly withheld; the money was used for lavish personal spending, and confiscation action is still to come. For compliant businesses, the takeaway is clear: understand the service being supplied, test the VAT position properly, and document every supplier check before payroll money starts moving. FAQs How did this fraud actually make money? It created VAT-charged payroll invoices, collected the VAT, and then held back the tax instead of paying it over. The court record shows that the money was then channelled into personal spending and related accounts. Can a business lose the right to reclaim VAT if fraud sits elsewhere in the chain? Yes. A business can lose input tax recovery on transactions connected with fraud, including cases where it knew or should have known there was a fraud risk. What checks matter most before outsourcing payroll? The essentials are identifying the real supplier, checking VAT registration, confirming who employs the workers, and reviewing evidence that payroll filings and tax payments are being made properly. Why does this matter for honest firms? For labour supply chains and umbrella company abuse, non-compliant operators can undercut compliant businesses, damage reputations and expose workers to tax and rights-related harm.
