VATWatch - February 2025
VAT and Churches
The listed places of worship grant scheme allows some churches to claim a grant covering the VAT they are charged on repairs.
This has now been extended to 31 March 2026 but a cap of £25,000 per church has been introduced.
EU Virtual Event VAT Tax Change
The EU has recently changed the rules on VAT taxes for virtual events and as of 1 January 2025, the supply of a live virtual event is taxable in the EU country where the consumer purchasing the online attendance resides.
Suppliers of virtual event services may be obliged to either VAT register in each country in which their consumers reside, or opt to use the non-union One Stop Shop system to account for the VAT on these types of supplies. Non-EU suppliers (such as those in the UK) will be significantly impacted and will potentially face double taxation if businesses are required to charge VAT in both the country they operate/registered in and the country in which the consumer receives their service.
Currently we are awaiting a response from HMRC on these changes, hoping they will set out what UK businesses should do.
VAT Tribunal Rules Against HMRC in Sports Drink Case
Global by Nature Ltd (GBN), an importer and distributor of organic products in the UK had been charging VAT to customers but requested repayment of the VAT it had charged between October 2016 and September 2020. HMRC refused their request on the basis that the range of protein shakes were all sports drinks and therefore fell within excepted item 4A of Group 1, Schedule 8 of the Value Added Taxes Act 1994.
GBN subsequently appealed this at a first-tier tribunal (FTT) making this the first decision to consider the meaning of “sports drink” since item 4A was introduced in 2012. After much consideration, with the FTT (relying on several dictionary definitions) found that a sports drink is one that contains high quantities of sugars and salts, which restore energy and electrolytes after exercise. With that in mind it also found that because the protein powder contained very little of either of these ingredients, the protein powder could not be a sports drink.
This result could have a significant impact on the nutrition industry but in view of the fact this is the first case to consider the meaning of 4A, HMRC may choose to make a further appeal.
David Tipping outlines this case in more detail in his Accounting Web article.
HMRC Sends a Brief Educational Email to Small VAT Registered Charities
HMRC’s One-To-Many team are sending a brief educational email to selected small VAT registered charities with the aim of raising awareness in the small VAT registered charities sector of their obligation to complete business/non-business apportionment calculations. HMRC are experiencing a high number of smaller charities who are not aware that they have non-business activities and are required to apportion their input tax.
Fundraising Exemption Update
The Yorkshire Agricultural Society (YAS), which is a charity, organised events including the Great Yorkshire Show aimed at educating the public.
Initially it treated the income received from the event as standard rated for VAT purposes, but subsequently reconsidered and submitted a claim that VAT was overpaid by £201,949 because the income from the event was in act exempt.
HMRC rejected this claim and also raised an assessment for a later period. Both these matters were appealed to the first-tier tribunal which found in favour of YAS.
CIOT Names Interest Rules as Unfair
With the rate of late-payment interest to increase in April 2025, the CIOT is urging the Government to re-introduce rules enabling HMRC to waive interest on underpaid VAT where no actual tax loss has occurred.
TOMS - HMRC v Sonder Europe Ltd
The case of Sonder looked at the buying in of leased accommodation which was then sold as short-term holiday lets. Sonder had successfully argued at the First Tier Tribunal that their supplies should fall within TOMS and so VAT was only due on the margin.
HMRC have now won their appeal against this. Sonder have until the middle of February to appeal so watch this space!
Thank you for taking the time to read this VATwatch round-up.
