Constable VAT Focus 8 March 2024


The Chancellor of the Exchequer delivered the Spring Budget 2024 on 6 March 2024. We have highlighted the VAT related announcements below.

VAT registration thresholds

In attempt to support SME’s the VAT registration threshold has been increased to £90,000. This is the first time in 7 years that the VAT registration threshold has been amended as it has remained at £85,000 since 2017.

In addition, the VAT deregistration threshold will also be increased to £88,000 from £83,000. These changes will likely impact those trading close to the thresholds and businesses may wish to review their position in light of these changes.

The changes will take effect from 1 April 2024.

VAT Treatment of Private Hire Vehicles

The government will launch a consultation on the impacts of the July 2023 High Court ruling in Uber Britannia Ltd v Sefton MBC in April. The government has stated that it is committed to exploring a range of viable options to ensure that this court ruling does not have any undue adverse effects on the private hire vehicle sector and its passengers.

VAT Retail Export Scheme

The government will consider the OBR’s review of the original costing of the removal of tax-free shopping alongside industry representations and broader data, and welcomes any further submissions in response to the OBR’s findings.


Revenue and Customs Brief 1 (2024): Live web streaming of funeral services
Due to recent media and technological developments there has been an increase in the provision of live web streaming of funeral, burial or cremation services, allowing mourners who are unable to attend in person, to view the proceedings in real time via live web streaming provided by an undertaker, cemetery or crematorium operator.

Whilst burial and cremation services are already exempt from VAT under Group 8, Schedule 9 VATA 1994, HMRC has now issued this brief to confirm that that the supply of such live web streaming of funeral, burial, or cremation services is also exempt from VAT under Group 8. However, HMRC highlighted that if web streaming is supplied by a third party for a separate consideration, that supply is not within the scope of this exemption, and will be subject to the standard rate of VAT.

Notice in accordance with Schedule 9ZE to the Value Added Tax Act 1994
HMRC has published this new notice in accordance with Schedule 9ZE to the Value Added Tax Act 1994 which has force of law. The notice provide guidance on what to do:

  • when businesses opt to register for the Import One Stop Shop (“IOSS”) scheme;
  • to complete and submit an IOSS scheme return;
  • to pay the VAT due on an IOSS scheme return;
  • when IOSS scheme registration details change; or
  • when businesses cease making qualifying supplies under the IOSS scheme.

VAT: DIY Housebuilders Scheme request for evidence
This newly published tax information impact note gives the power to HMRC to request additional evidential documentation to verify a DIY housebuilders claim. Under the new process for DIY claims, HMRC no longer requires all relevant invoices to be submitted, therefore the legislation has been updated to allow the Commissioners to request further evidential documentation (including invoices) in order to validate a claim, even after submission of the claim.

Late payment interest if you do not pay VAT or penalties on time
From 1 January 2023, HMRC will charge VAT registered businesses late payment interest from the first day their payment is overdue until it is paid in full. The above guidance, specifically in relation to how taxpayers can object to late payment interest, has been updated.

Investment gold coins (VAT Notice 701/21A)
Certain investment gold coins are VAT exempt under Group 15, Schedule 9 of VATA 1994. The UK list of coins recognised as investment gold coins has been updated and can be found using the above link.

Updates on VAT appeals
The above guidance sets out the list of VAT appeals that HMRC has lost, or partly lost, that could have implications for other businesses. The list of VAT appeals that HMRC has lost and may impact other businesses has been updated with 2 removals, 3 amendments and 1 new addition.

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 and details 3 additions, 2 removals and 1 amendment.


Court of Appeal

1. Hospital car parking subject to VAT?

This is a long-running appeal by Northumbria Healthcare NHS Foundation Trust (the Trust) in relation to HMRC’s refusal to repay overdeclared output VAT on the supply of car parking facilities operated by the Trust at their sites. The VAT at stake in this appeal is relatively limited, but around 50 similar appeals by other NHS bodies are stayed behind this case with total VAT at stake in the region of £70million.

Public authorities are not regarded as taxable persons for VAT purposes if the transactions in question are ones in which they “engage as public authorities”. However, this does not apply where that treatment “would lead to significant distortions of competition”. The Trust took the view that it’s supply of car park was not subject to VAT under these provisions; however, HMRC argued that, although the Trust is a body governed by public law, the Trust is not acting as a public authority and, even if it were, VAT would still be chargeable because there would otherwise be significant distortions of competition. The effect of the case law is that whether the Trust is acting as a public authority turns on whether car parking is provided under a “special legal regime”.

The FTT did not accept that car parking was supplied under a special legal regime and also concluded that treating the Trust as a non-taxable person would lead to actual or potential distortions of competition which are more than negligible and dismissed the appeal. The Upper Tribunal (UT) upheld the FTT’s decision, concluding that the provision of car parking by the Trust is subject to VAT. Our summary of the UT’s decision can be read here.

The Trust appealed to the Court of Appeal on the grounds that the UT erred in concluding that the Trust did not supply car parking under a special legal regime. The Court of Appeal considered whether the Trust was acting as a public authority and concluded that the test is whether the activities are engaged in under a special legal regime, or under the same legal conditions as private operators.

The Court raised the fact that the Trust has a legally enforceable duty to adhere to the guidance set out in the 2015 Parking Principles. After careful analysis of this guidance, the Court concluded that this legally enforceable duty on the Trust is capable of amounting to legal constraints on the way it carries on its car parking activities which satisfies the condition that the car parking was provided under a special legal regime. Therefore, the Trust was acting as a public authority.

The Court also found that the FTT and UT applied the incorrect test to conclude that there would be significant distortion of competition. It confirmed that HMRC requires facts, based on evidence, demonstrating that non-taxation of the Trust would create significant distortion of competition. The Court concluded that “Distortion, let alone significant distortion, cannot be assumed based on participation in the car parking market, or based on a finding that competition exists. The necessary findings of fact are not present in this case.”

As a result, the Court concluded that the FTT and UT decision must be set aside and allow the Trust’s claim for repayment of VAT.

Constable Comment: The Court of Appeal overturning the FTT and UT’s decision was a significant turn in this case and it will certainly be interesting to see whether HMRC pursues this decision further. Whilst the VAT repayment to the Trust in this appeal was in the region of £270k, the decision could be binding on over 50 other appeals by similar NHS bodies amounting to around £70million of VAT.  Similar bodies should consider the submission of protective claims if this has not been done already and bringing existing claims up to date.


2. Organix and Nakd bars: Zero rated or confectionery?

This appeal concerns whether sales of Organix and Nakd bars by the appellant, WM Morrisons Supermarket Plc (Morrisons), are of ‘confectionery’ and subject to VAT at the standard rate. It is common ground if the products are not confectionery, they are zero rated. This appeal has been ongoing since 2021 when the FTT initially concluded that the products were confectionery. However, in 2023, the Upper Tribunal (UT) overturned the decision, remitting the case back to the FTT to be heard by a new panel. Both the FTT and Upper Tribunal case summaries were included in previous VAT Focus newsletters.

The UT held that in analysing whether the products were confectionery, the FTT wrongly treated certain factors as irrelevant and should have considered the healthiness of the products and their marketing as healthy, as well as the fact that the products do not contain ingredients associated with traditional confectionery, such as cane sugar, butter or flour.

The FTT has now found that the products all look, feel and taste like confectionery items, they are small bars in a similar size to chocolate or candy bars and are clearly intended to be eaten with hands. The bars have the appearance, texture, mouthfeel, density and taste of confectionery and would be so regarded by the informed ordinary person in the street. With regards to the absence of traditional ingredients, the FTT commented that ‘confectionery’ encompasses items that are not made from traditional ingredients but alternatives or substitutes of such ingredients, such as the ingredients used in the Organix and Nakd bars. The FTT concluded that “the absence of traditional confectionery ingredients does not outweigh the fact that the Products have the most important characteristics of confectionery, namely they appear, feel and taste like confectionery.”

With regards to the ‘healthy’ aspect, the FTT gave little weight to the products marketing on the website commenting that such evidence is tempered by the fact that the primary aim of such marketing material is to maximise sales rather than to inform, and marketing cannot determine where the products fall on the confectionery/non-confectionery sweet snack continuum. The FTT also noted that all of the products fall within the Food Regulations 2021 as food which are ‘less healthy’ and their placement in stores is regulated. The FTT concluded the products are ‘confectionery’ and therefore subject to VAT.

Constable Comment: It will certainly be interesting to see whether Morrisons intends to take this case further given there has now been three Court rulings in relation to these products. The case provides further insight into how the Tribunals arrives at a decision in relation to a food item’s VAT liability, considering a multi-factorial assessment. This is an ambiguous area of VAT law with an increasing number of cases being heard by the Tribunal where HMRC disagrees with the VAT treatment applied by taxpayers. Constable VAT regularly advises on the VAT treatment of food items and would be pleased to assist with any related queries.

3. Tribunal appeal: Hardship application

This case concerned whether SC Business Gateway Ltd (SBG) should be permitted to pursue its appeal to Tribunal without having to pay the VAT in question, £273,857, to HMRC. SBG’s business activity was purchasing luxury merchandise and exporting these items to countries in Asia.  The sum owing resulted from HMRC raising assessments following its decision to disallow the input VAT claimed on the purchase of goods.

An appeal against the VAT assessment can only proceed if HMRC are satisfied that the requirement to pay, or deposit, the amount of VAT would cause SBG hardship. HMRC was not satisfied that this was met, therefore SBG appealed t]o the Tribunal.

The burden of establishing hardship lies with the appellant. In this case, SBG failed to provide documentary evidence to demonstrate that paying the VAT assessed would cause financial hardship. The appellant did not provide correspondence from banks to substantiate the balance of the accounts at the relevant time nor did they provide company accounts to assist with establishing the appellant’s true financial position. In addition, the Tribunal found the appellant’s evidence to contain inconsistencies in some respect. Considering this, together with the lack of documentary evidence, the Tribunal dismissed the appeal commenting that ‘The absence of contemporaneous accounting evidence may justify the Tribunal placing little, if any, weight on an oral assertion that the Appellant is unable to afford to pay’.

Constable Comment: Whilst this case did not consider the technical points in dispute, it is a useful reminder to all taxpayers that an appeal can only be entertained if the VAT disputed is either paid or deposited to HMRC, or the appellant is able to demonstrate either to HMRC or the Tribunal that by paying the VAT, the appellant would suffer financial hardship. This case highlighted that providing documentary evidence is crucial to demonstrate hardship, and in the absence of such evidence, HMRC or the Tribunal is unlikely to consider oral submissions or evidence.

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.