Christmas and New Year closure
We will be closing our office at 5.30pm on Wednesday, 24th December 2025 and will reopen on Friday, 2 January 2026 at 9am. If you have any urgent queries during this time, please contact your usual Constable VAT partner by email and they will respond to you as soon as possible.
We have not sent Christmas cards this year and instead donated to two charities – Little Lifts and the Stroke Association. However, we would like to take this opportunity to wish all our clients and regular readers a Merry Christmas and a happy and prosperous New Year.
HMRC NEWS
HM Revenue and Customs Brief 9 (2025): VAT Liability of the supply of temporary medical staff
This newly published brief sets out HMRC’s revised interpretation of the VAT exemption in respect of ‘The provision of a deputy for a person registered in the register of medical practitioners’. Previously, HMRC’s position was that exemption is restricted to the supply of deputising services, like the GP out of hours service. Following the Isle of Wight NHS Trust v HMRC [2025] UKFTT 1114 (TC) case, HMRC now accepts, and will not appeal, the Tribunal’s conclusion that VAT exemption also applied to supplies of staff, not just the supply of medical care. The Tribunal found that the exemption applied to locum doctors, including those provided by employment businesses and was therefore not limited to out of hours GP cover.
HMRC has confirmed that it will issue updated guidance in respect of the decision in due course and in the meantime those businesses who charged VAT (20%) on supplies of locum doctors in the previous 4 years can now reclaim overdeclared output VAT via an error correction notification or adjust VAT returns (subject to the applicable thresholds). We would flag that if supplies are retrospectively treated as VAT exempt, this will likely have an impact on the amount of input VAT that was recoverable and must be taken into account as part of any error correction notification. The unjust enrichment provisions may also need to be considered. It is very important that any error correction submitted to HMRC is carefully managed, and we would recommend seeking professional VAT advice if your business requires assistance with this.
Group and divisional registration (VAT Notice 700/2)
The above guidance provides information about VAT grouping. Where it is considered necessary for the ‘protection of the revenue’, the VAT grouping legislation gives HMRC the power to prevent a person joining a VAT group or remove an existing member from a VAT group. HMRC has updated the definition of ‘protecting the revenue’ in section 4.1 of the above guidance.
Using postponed VAT accounting
This is a newly published collection of existing VAT notices bringing together postponed VAT accounting guidance, giving detailed information about:
- Checking when you can account for import VAT on your VAT Return
- How to complete your VAT Return to account for import VAT
- Getting your postponed import VAT statement
- Understanding your monthly postponed import VAT statements
- Managing your import duties and VAT accounts
Send details to support your VAT repayment claim
If taxpayers submit a VAT repayment return, meaning the input VAT recoverable exceeds the output VAT due, HMRC may send a letter or email requesting details in support of the VAT repayment claim. The above guidance provides support to taxpayers if they are required to provide additional information to HMRC. The guidance has now been updated to remove examples of specific documents to provide with the aim to make the guidance more clear.
Fulfilment House Due Diligence Scheme registered businesses list
The above guidance can be used to check if a business that stores goods in the UK is registered with the Fulfilment House Due Diligence Scheme. The list has been updated with 7 additions and 2 removals.
CASE REVIEW
First Tier Tribunal
1. VAT Error Corrections: The 4 year cap
In the case of Express Brands Ltd (EBL) the appellant sold goods via Amazon, eBay and other online channels. EBL sought repayments of output VAT over declared in the UK in respect of VAT accounting periods 06/14, 03/15, 03/16, 06/19 and 09/19 . The error came to light only after the German tax authority demanded VAT on sales made in Germany through Amazon. EBL submitted a VAT accounting error correction notification (ECN) in September 2023. HMRC allowed the portion of the claim relating to 09/19, which fell within the statutory time limit, but refused repayment for all earlier periods on the basis that the four year cap in section 80(4) VATA 1994 had elapsed.
EBL appealed, arguing that the Tribunal should interpret the legislation and the VAT Regulations more flexibly, relying partly on fairness and partly on the Limitation Act 1980. Whilst the Tribunal had sympathy for the commercial consequences, EBL faced paying VAT twice across two jurisdictions, it emphasised that the law simply leaves no room for discretion. The Tribunal confirmed that Section 80(4) is mandatory. If a claim is made more than four years after the end of the relevant VAT period, HMRC “shall not” be liable to repay it. The Tribunal also agreed with HMRC that the Regulations, on which EBL sought to rely on, (including the discretion in regulation 35) cannot override the primary legislation. As the older claims ranged from 66 to nearly 1,900 days out of time, the Tribunal dismissed the appeal.
Constable VAT Comment: Whilst this was a fairly straightforward decision for the Tribunal, it is a very important reminder that the four year cap within Section 80 is a firm deadline and offers no flexibility or room for discretion and it is unforgivingly rigid. HMRC referred to earlier Upper Tribunal decisions (which sets precedent) quoting that “Section 80 gives no discretion either to the Commissioners or to the Tribunal. It is absolutely clear and has to be applied”. HMRC went further to confirm that the statute also does not provide for any mitigation or consideration of unfortunate circumstances. Whilst we have sympathy for the appellant, legislation provides that the four-year cap must be interpreted strictly. If any error corrections are being considered, it is crucial that all VAT accounting periods are monitored closely and error corrections are notified to HMRC within the appropriate time limits. Constable VAT has significant experience in assisting clients with error correction notifications. If you or your business needs further support or wish to discuss submission of a possible error correction, please do not hesitate to contact us.
2. VAT Exemption: Welfare Services
Cascade Care Ltd (CCL) provides specialist supported living services to adults with mental health needs, autism, learning disabilities and acquired brain injuries. CCL delivers its services at sites in England and Wales. Its appeal concerned services supplied in Wales only.
Following submission of a non-statutory clearance application by CCL, HMRC confirmed that CCL’s supplies made in Wales fell within the VAT exemption for supplies of welfare services. CCL argued that its supplies fell outside the VAT exemption (were taxable and subject to VAT at the standard rate) on the basis it was not state regulated in Wales.
Welfare services may be exempt from VAT when supplied by a charity, state-regulated private welfare institution or agency, or a public body (Item 9, Group 7, Schedule 9, VAT Act 1994). Note 8 to Group 7 defines state-regulated for the purposes of the VAT exemption as follows:
“In this Group “state-regulated” means approved, licensed, registered or exempted from registration by any Minister or other authority pursuant to a provision of a public general Act, other than a provision that is capable of being brought into effect at different times in relation to different local authority areas.”
The Note then lists the relevant Acts. The listed Acts do not include the National Assembly of Wales. It is for this reason that CCL argued its supplies in Wales were not state-regulated and therefore VAT exemption does not apply. (Wales has devolved powers over health and social care and with effect from 1 January 2018 CCL’s services supplied in Wales were regulated by Care Inspectorate Wales (CIW). Regulation by CIW is pursuant to an act of the National Assembly of Wales.)
The First Tier Tribunal agreed with one of the arguments put forward by HMRC, supporting VAT exemption. The Tribunal stated that it was ‘abundantly sure’ that there had been a drafting error when the legislation was written and it was ‘abundantly clear’ that the provision that Parliament would have made would have been to include within the definition of ‘Act’, “an Act or Measure of the National Assembly for Wales”. The Tribunal commented:
“I have reached the view that this is one of those very rare occasions where it is permissible, and indeed required of me, to read words into legislation to correct an obvious drafting error.
The insertion is not too big, it simply completes a list of institutions reflecting devolution arrangements as they now prevail in the UK.
Further, the subject matter is not penal, it is concerned with the appropriate charging of VAT in a consistent and comprehensive manner across the nations of the UK.”
The Tribunal therefore dismissed CCL’s appeal. CCL’s supplies of welfare services in Wales, regulated by CIW, fall within the VAT exemption.
The Tribunal also considered HMRC’s other arguments on updating construction and conforming interpretation. The Tribunal commented that if it had not found for HMRC on the basis of correcting a drafting error, it would have found in favour of HMRC on the basis of a conforming interpretation. However, it found the arguments HMRC put forward concerning updating construction and the always speaking principle did not assist HMRC in this case.
Constable VAT comment: It is uncommon for the Tribunal to correct possible drafting errors, and this case provides an interesting review of circumstances when it is permissible for the Tribunal to do so. When the relevant legislation (Note 8) was drafted in 2002, the National Assembly for Wales could only pass delegated legislation, and it could not enact primary legislation in 2002. It will be interesting to see if CCL choses to pursue this matter further.
Please note that this newsletter is intended to provide a general overview of the subject. No liability is accepted for the opinions it contains or for any errors or omissions. Constable VAT cannot accept responsibility for loss incurred by any person, company or entity as a result of acting, or failing to act, on any material in this blog post. Specialist VAT advice should always be sought in relation to your particular circumstance.