Constable VAT Focus 4 May 2023


Revenue and Customs Brief 5 (2023): Change to the VAT treatment of medical services carried out by non-registered staff directly supervised by pharmacists
During the Spring Budget 2023, the government announced that the VAT treatment of medical services carried out by staff directly supervised by pharmacists will be exempt from VAT from 1 May 2023. The brief explains:

  • The changes to the VAT treatment of services directly supervised by pharmacists
  • Where businesses can find more information

Pay the VAT due on your One Stop Shop VAT Return
The above guidance can be used to find out how to pay the VAT due on your One Stop Shop VAT (OSS) Return. HMRC has updated the guidance to confirm that taxpayers can now access the OSS Union scheme through their HMRC business tax account.

Fulfilment House Due Diligence Scheme registered businesses list
This guidance can be used to check if businesses storing goods in the UK are registered with the Fulfilment House Due Diligence Scheme. The list has been updated with 10 additions.

Energy-saving materials and heating equipment (VAT Notice 708/6)
The above guidance can be used to find out how to account for VAT if you’re a contractor or subcontractor installing energy-saving materials and grant-funded heating equipment. Guidance on the time-limited zero rate of VAT for installations of energy-saving materials installed in residential accommodation in Northern Ireland, with effect from 1 May 2023, has been added.

Sales of second-hand motor vehicles in Northern Ireland
From 1 May 2023, the second hand motor vehicle payment scheme to claim VAT-related payments can be used. The scheme can be used by dealers who sell second hand motor vehicles in Northern Ireland that have come from Great Britain. In addition, the scheme can be used if you are VAT registered in the EU. Further information about that can be found here. Both guidance have been updated with information about what should be included in your stock book.


Upper Tribunal

1. Place of supply of football agent services

This appeal related to the VAT treatment of a payment of EUR 4 million received by Sports Invest UK limited (SI), the appellant, from Football Club Internazionale Milano SpA (Inter), an Italian football club, in relation to the transfer, in August 2016, of a Portuguese football player (Joao Mario Naval da Costa Eduardo) from Sporting Clube de Portugal (Sporting), a Portuguese football club, to Inter.

SI is in business as an intermediary in the football industry, established and VAT registered in the UK. It sought out opportunities to represent football players and also sought out opportunities to represent or advise football clubs. SI signed a player representation agreement with the player in 2016 which included a remuneration clause for 10% of the player’s total gross income from Inter, which was estimated to be around EUR 3 million; however, a waiver letter was issued which waived all fees in that agreement. Instead, SI was paid by Inter (the club who purchased the player). Under the ‘inter agreement’ the fee was 10% of the EUR 40million transfer fee payable by Inter to Sporting (EUR 4 million).

HMRC took the view that SI supplied services to both the player and Inter and VAT was due on EUR 3 million (supply made to player)as this was third party consideration paid by Inter for a supply made by SI to the player which was a supply made in the UK, therefore subject to VAT. The remaining EUR 1 million was assumed to relate to services made to Inter. This place of supply for this is Italy, therefore not subject to VAT. However, SI took the view that all of the payment (EUR 4million) was consideration for services supplied to Inter and the place of supply was Italy, meaning no VAT was due.

The FTT initially considered the terms of the relevant contracts; however, it then went on to consider whether the economic and commercial reality of the case reflects the contractual terms. Having done so, the FTT concluded that the payment was made in consideration for the services supplied to Inter and not as consideration for services supplied to the player. As a result, the place of supply was Italy and no VAT was due. The appeal was allowed.

Constable Comment: This was a ‘who supplied what to whom’ case involving complex ‘agency’ contracts in the football industry. The FTT highlighted the importance of considering both the contractual as well as the economic and commercial reality of a situation. In addition, it considered an alternative argument of SI regarding paragraph 10 of Schedule 4A VATA 1994. Even though there was no need to conclude on this point, the full decision contains in  brief terms, the FTT’s view of the application of paragraph 10.

2. Appeal out of time

This case considered two appeals which were heard at a joint appeal. Mr Uddin is the sole director and shareholder of the second appellant, Kazitula Limited (The Company) which ran a restaurant business. HMRC imposed VAT and corporation tax assessments and deliberate inaccuracy penalties on the company, totalling around £532,266 due to suppressed sales. Shortly afterwards, the company went into liquidation. HMRC issued a personal liability notice (PLN) to Mr Uddin totalling £212,506. Mr Uddin and the liquidators of the company lodged their respective appeals to the FTT between 16-18 months outside of the 30 day time limit.

Mr Uddin appealed to the FTT on the grounds that his accountant (representative) mislead him. He asked his accountant to handle the assessments and made regular checks on the progress of the case. Each time he was assured it was being handled.

The FTT had previously rejected the appeal on the grounds that the Tribunal was provided only with cursory information about communications with the accountant and no copies of correspondence was provided. In addition, the PLN issued stated all the relevant time limits, therefore there was no reasonable excuse and the FTT did not grant permission for a late appeal.

Mr Uddin now bought an appeal to the Upper Tribunal (UT), arguing that the FTT failed to deal with his core submission. He argued that the FTT only considered that Mr Uddin had relied on his accountant, as opposed to being mislead by him.

The UT concluded the FTT did not err in law. Whilst it did not specifically address whether Mr Uddin was mislead or not, the cursory enquiries on progress he made were insufficient to displace the general rule that the taxpayer should bear the consequences of the representative’s failings.  Therefore, whether he was misled or not would not have altered the outcome.

The company had also appealed to the FTT, which rejected its argument.  It appealed to the UT on two grounds. First, it argued the FTT failed to take account of the practical difficulties that are generally faced when a company goes into liquidation, in complying with the 30 day time limit and therefore reached an unjust result. Second, it argued the FTT failed to recognise that the issue of whether Mr Uddin was misled by his accountant was a relevant factor to consider when it came to considering all circumstances of the case.

The UT has rejected both grounds of appeal and concluded that the FTT was correct to reach the conclusion that the appeal was out of time.

Both Mr Uddin and the company’s appeal was dismissed by the UT.

Constable Comment: This case highlights the importance of lodging an appeal with the Tribunal within the 30 day time limit.  A Tribunal may refuse to hear an appeal if it is out of time and there is no reasonable excuse for the delay.


3. Are turmeric shots a beverage?

This case concerned Innate-Essence Limited, trading as The Turmeric Co (TTC) ‘s appeal against HMRC refusal of an error correction in the sum of £80,730.52 for overcharged VAT. TTC supplied turmeric shots and it contends that they fall within Group 1, Schedule 8, VATA 1994 and are a zero rated food item.

HMRC took the view that the turmeric shot falls within the excepted item of beverages and  it is subject to VAT at 20%.

The term ‘beverage’ is not defined in UK legislation therefore the FTT referred to various case law and applied a multifactorial assessment to reach a conclusion. The FTT initially considered the Bioconcepts test.  Whilst it agreed with HMRC that the shots were a drinkable liquid commonly used, it failed on other aspects of the test, in particular that a beverage  increases bodily liquid levels and it is taken to slake thirst. The shots are sold in 60ml quantity, include flax oil and pepper, therefore the FTT considered it highly unlikely that a typical consumer would use the product to increase liquid levels or slake thirst.

HMRC also argued that the shots are consumed to give pleasure.  The FTT rejected this argument. Various customer reviews confirmed that customers did not like the taste. It was very strong and sharp. However, TTC confirmed that the shots are not to taste ‘synthetic’ but rather they aim to reflect the product’s freshness of ingredients. The FTT agreed that the shots are not consumed for pleasure but for the claimed long terms health and wellbeing benefits.

The FTT also considered the ‘unexpected guest’ test and took the view the shots are not a beverage that would be offered to a guest by a host.

HMRC argued the marketing of shots confirmed they compete in the same market as many other beverages.  However, the FTT disagreed stating that the shots are marketed on the basis of the nutritional content of the high-quality ingredients that are stated to support health and wellbeing. In addition, the most popular method of purchasing is on a subscription service and the shots are expensive when compared to other common beverages.

As a result of all of the above considerations, the FTT took the view that shots should be properly zero rated for VAT purposes as a food but not a beverage. The appeal was allowed.

Constable Comment: This case considered various factors to determine what constitutes a ‘beverage’. If there is any ambiguity regarding the VAT liability of a food item, we recommend obtaining professional advice to mitigate the risks of HMRC challenging the VAT treatment applied. Constable VAT has  considerable experience dealing with zero rated food items and would be pleased to assist with any relevant queries.

4. DIY Housebuilders scheme

This case concerned a DIY claim made by Mr Steven James Mort (The appellant) in the sum of £135,671.72 regarding a new dwelling.

HMRC refused to refund VAT charged on some invoices on the grounds that these related to supplies of services and should have been zero-rated. As the VAT was not properly charged, it is not eligible for a refund under the DIY scheme.

The appellant argued these were building materials only, and VAT was due at 20% which is due for a refund. The total sum of VAT originally under appeal was £37,439.82

The FTT reviewed each invoice and sought to identify the predominant element of the supply, taking the view of a typical customer and considering the qualitative and quantitative importance of the different elements being supplied.

With regards to some of the invoices, the FTT ruled that the predominant element of the supply was the building materials.  Even though it may have included installation services those services were not sufficiently significant to prevent the supply being classified as “goods”. As a result, VAT incurred on these invoices was properly charged and therefore due for a refund under the DIY scheme.   However, with regards to some invoices the FTT ruled the predominant supply was the services.  As a result, these should have been zero rated by the supplier and therefore were not due for a refund under the DIY claim.

In addition, HMRC had disallowed claims relating to furniture that was not considered to be building materials, such as bedside cabinets, mirrored wall and master dressing room furniture including lighting to wardrobes. The FTT agreed with HMRC regarding the furniture issue.

Constable Comment: In this case the FTT provided a useful analysis regarding whether the predominant element of a supply is the building material or the installation of the building materials.  The point at which a supply of “installed goods” becomes part of a “construction service” is an interesting point that is seldom considered.  

Perhaps the most interesting comments in the decision concern the FTT’s observations concerning the fact that HMRC was arguing that VAT could not be claimed when suppliers had charged VAT incorrectly but also took no action to refund overcharged VAT to those suppliers or notify them of their error.  The FTT said: ‘The effect of HMRC’s approach to these proceedings is to seek to retain VAT to which HMRC has no ultimate entitlement. This is inherently unsatisfactory.’ The FTT also stated ‘Questions could legitimately be asked as to whether HMRC’s approach accords with HMRC’s collection and management obligations and the effective use of Tribunal time.’   

Whether (as the FTT seems to suggest) HMRC’s approach amounts to an abuse of power and could be subject to a judicial review is hard to judge.  It is certainly standard HMRC practice to take no action to correct overpayments of VAT unless the supplier who has made the VAT accounting error proactively seeks a refund.  It also refuses to get involved if the matter is raised by a customer to whom VAT has been overcharged. This policy is difficult to reconcile with HMRC’s Charter undertaking “We’ll work within the law to make sure everyone pays the right amount of tax and gets their benefits and other entitlements”.


Since the end of the transitional period on 31 December 2020 European Court judgements are not binding on the UK in most cases. However, it is expected that UK courts will still take these judgements into consideration and there may be occasions where they have a more binding effect.

5. Recharging points for electric vehicles

This case concerned P. in W, (PW)  a company planning to install and operate electric vehicle charging stations accessible to the public. Stations would be equipped with both quick charge connectors and slow charge connectors. The price billed to users would be based on the duration of the charging session as well as the standard (quick or slow) of the connectors chosen.

PW also intends to provide the necessary technical support and a platform (website or application) that enables users to reserve a connector in advance and to view transactions and payment history.

PW took the view that this single supply was a ‘supply of services’ because the supply consisted of access to technologically advanced recharging devices which offer quicker and more efficient recharging. The users were billed for the time they had access to the devices rather than the amount of electricity used.

On the other hand, the national courts took the view it was a ‘supply of goods’ as the principal supply was the electricity required to charge the vehicles, and any other services offered by PW had to be regarded as ancillary. The referring Court therefore asked the following question:

Does a single complex supply consisting of:

  • The provision of access to recharging devices
  • The supply of electricity, within duly adjusted parameters, to the batteries of the vehicle
  • The necessary technical support for users, and
  • The provision of a platform whereby users can reserve a connector and view their transactions and payment history

constitute a supply of goods or a supply of services?

The CJEU highlighted that a supply of good is defined so as to include a supply of electricity. It stated that the supply of electricity to the batteries constitutes a supply of goods, in so far as the supply enables the user of the recharging station to consume the electricity transferred in order to propel their vehicle. The other element of the supply constitute a minimal supply of service that necessarily accompanies the supply of electricity and are not an end in itself but a means of better enjoying the supply of the electricity.

As a result of the above, the CJEU concluded that the single complex supply made by PW,  consisting of access to recharging devices, the supply of electricity, technical support and the provision of IT platform constitutes a supply of goods.

Constable Comment: In our view this was always a likely outcome to this referral to the CJEU. 

Whilst CJEU decisions are no longer binding in the UK, the principles applied by the CJEU remain relevant in interpreting UK law and a case heard in the UK would probably have delivered the same decision.

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.