UK VAT Compliance Guide - See how VAT applies in the UK to different goods and services including VAT Rates, VAT Registration, VAT returns and VAT Recovery. Autumn Budget Read More VAT Risk & Control Framework Read More UK Carbon Border Adjustment Mechanism (CBAM) - 2027 Read More Oil and Gas - Place of Supply for VAT Read More Banking - How VAT is Applied to Services and Recovered on Costs Read More Fuel & Power - How VAT Applies Read More UK VAT is primarily governed by Law ( VAT Act 1994) and is enhanced by case law and administered by the UK Tax Authority known as HMRC (Her Majesty's Revenue & Customs). VAT (Value Added Tax), is a consumption tax levied on goods and services at each stage of the supply chain, with the final cost being borne by the end consumer. VAT Registered Businesses will collect VAT (output) from customers and pay this to HMRC usually on a monthly or quarterly basis. VAT Registered Businesses can also fully recover the VAT they pay on their own purchases subject to any partial exemption restrictions . On this page you will find detailed UK VAT guides, articles and links to help you better understand the key issues in relation to UK VAT compliance and other indirect taxes and help your business stay VAT compliant. For quick and immediate answers for specific VAT queries you may have, use our AI VAT Advisor which will provide guidance and key VAT information along with detailed summaries from the knowledge base of our site. UK VAT Registration Businesses in the UK (including Isle of Man) are required to register for VAT If the value of their Taxable Turnover (standard rate, reduced rate and or zero rated supplies) in the preceding 12 months or less goes over the registration threshold of £90,000 If the value of their taxable turnover (standard rate, reduced rate and or zero rated supplies) is likely to exceed £90,000 in the next 30 days if the business is based outside the UK and supplies goods or services in the UK or are expected to in the next 30 days. (Threshold does not apply here) If a businesses is being taking over a VAT registered business as a going concern If you make distant sales into Northern Ireland and exceed the annual threshold. Note: Businesses include Sole Traders, Partnerships, Limited Companies, Clubs, Associations. What is Taxable Turnover Standard Rated Sales of goods and services Zero Rated Goods and Services Reverse Charge Output VAT Any Goods or Services you barter or part exchange The value of any goods you have used for private use Property services supplied (rent and service charges) where you have opted to tax the building. What is not Taxable Turnover Sales of capital items such as buildings , machinery, cars Exempt supplies Voluntary Registration You can apply to HMRC for voluntarily registration if: you are making taxable supplies where their value is under the £85,000 threshold. This will allow you to recover VAT expenses incurred. You are intending to make taxable supplies in the near future Register - online here UK VAT Explained VAT (Value Added Tax) is a tax on consumption and is added to the sale of goods and services supplied by VAT Registered businesses. Not all products and services sold attract VAT and there are a number of VAT rates or categories as follows: Standard Rated 20% (taxable) Reduced Rate 5% (taxable) Zero Rated (taxable) Exempt Outside The Scope Depending on the goods being sold or services being provided, one of the categories above will be applied to the sale. Standard Rated Goods and Services Standard Rated goods and services are goods sold or supplied by VAT registered businesses and include 20% VAT. Therefore invoices to customers will include 20 % VAT. Standard Rated services fall into the taxable services bucket and where businesses make taxable sales and exceed or are likely to exceed £90,000, they are required by law to Register for VAT. Examples of Standard Rated goods and services include: Fuel Professional Services such as Legal and Accountancy Computers and Mobile phones Hotel Accommodation No Domestic Energy Alcohol Restaurant food and hot takeaways Reduced Rate Goods and Services Reduced rate VAT of 5% is mainly applied within the domestic fuel and construction industry. Examples of Reduced Rate VAT at 5% include: Domestic / residential energy bills (Gas & Electric) Gas fired boiler installation Radiator Connection or re-connection to the gas mains Renovating a dwelling that has been empty for at least 2 years Zero Rated Goods and Services Goods and services supplied as Zero Rated VAT are taxable supplies but without VAT applied. Therefore invoices generated and sent to customers for zero rated supplies will not include VAT. Examples of Zero Rated goods and services include: Children's clothing Books Sewerage services supplied to domestic or industrial customers Water supplied to domestic households Insulation Take away - cold food Note: where businesses make sales of goods and services to non UK business customers, these can also be treated as Zero Rated in some instances as they are deemed outside the scope of UK VAT but are classed as taxable services which carry the right to deduct Input VAT. (Please see place of supply button) Exempt Goods and Services Exempt supplies of Goods and Services unlike standard rated and zero rated are not taxable supplies. Exempt supplies are listed in the VAT Act 1994 Sch 9 and include the following: Postal Services Insurance Land and Property Rental Education Financial Services Tax Point Rules Tax points are the specific points in time when sales of goods or services take place and are governed by rules set out by HMRC. VAT registered businesses must account for VAT within the period the tax points for their sales occur. So if a tax point occurs in March and the businesses next VAT return period is January to March then the VAT on the sale will have to be included within the quarter ending March VAT return. Basic Tax Point Goods - The date when you send them to your customer or the customer takes them away or for goods assembled at a suppliers premises, when the goods are made available to the customer Services - The date when the service is performed — it’s normally taken as the date when all the work except invoicing is completed Actual Tax Point The basic tax point will be overridden if an actual tax point is created. An actual tax point is created when: An invoice is issued or payment is received (whichever is first) before the basic tax point. An invoice is issued up to 14 days after the basic tax point You do not have to follow the 14 day rule, but if you decide not to you must tell HMRC by writing to the VAT Written Enquiries Team . If you wish to have an extension of the 14 day rule, then you must apply to HMRC by writing to the VAT Written Enquiries Team , giving your reasons. Note: Failure to tell HMRC about extending the 14 day rule will result in the tax point reverting to the basic tax point. Continuous Supplies of Services If you supply services on a continuous basis and receive payments regularly or from time to time, there’s a tax point every time you issue a VAT invoice, or receive a payment, whichever happens first. If payments are due to be made at regular intervals (for example, by banker’s order or direct debit), you can issue a VAT invoice at the start of any period of up to one year (provided that more than one payment is due in the period) to cover all the payments due in that period. For each payment you should set out the: VAT-exclusive amount Date on which the payment is due Rate of VAT VAT payable If you decide to do this, you do not have to account for tax on any payment until the date on which it is due, or date you receive it, whichever happens first. Your customer must not reclaim, as input tax, any VAT shown on the VAT invoice until the date on which the payment is due, or you have received the payment, whichever happens first. The same procedures apply to continuous supplies of goods, in the form of water, gas and electricity. Goods supplied on sale or return, approval or similar terms When you supply goods on sale or return, for example, they have not been sold and you still own them until such time as they’re adopted by your customer. Adoption means that the customer indicates a wish to keep them. Until your customer does so, your customer has an unqualified right to return them at any time, unless you have agreed a time limit. You may have fixed a time limit of adoption of less than 12 months from the date when the goods were sent. If a time limit has: Been fixed for a period of 12 months or less, then the Basic Tax Point is the date the time limit expires Not been fixed or fixed for a period of more than 12 months, then the Basic Tax Point is 12 months from the date when the goods were sent Note: In either case if your customer adopts the goods before the time limit expires the date of adoption becomes the basic tax point. Also the basis tax point as mentioned above will be overridden by the actual tax point on the date an invoice issued by the business providing the goods or the date payment is received for the goods, which ever is earlier. If you receive a payment which is not returnable, this will normally indicate that the goods have been adopted. The payment of a deposit required as a condition of delivery — which is repayable if the goods are returned — does not constitute adoption. Finally, It is a businesses responsibility to make sure that its customers notify them promptly when they have adopted goods. Goods taken for personal or other non-business use Goods that are taken out of a business: Permanently for non-business use will have a basic tax point on the date when the goods are taken or set aside for this purpose Temporarily for non-business use, but they’re still part of its stock or business assets, then a tax point is triggered each time they’re used or — if the non-business use continues over a period of time — on the last day of each tax period that the goods are used or made available for that purpose VAT Returns VAT Registered businesses that make supplies of goods and services are required to file their VAT returns to HMRC either monthly or quarterly (depending on VAT scheme) to pay over the Output VAT collected on sales to their customers and also to recover any Input VAT they have incurred on supplies they have purchased for operating their business. The difference between the Output VAT collected and the Input VAT incurred will form the basis as to whether VAT is payable or recoverable from HMRC. VAT collected on Sales greater than VAT incurred on purchases = Payment due to HMRC VAT incurred on purchases greater than VAT collected from customers = Recovery of VAT from HMRC Any exempt and zero rated supplies a firm makes to its customers or purchases from its suppliers also need to be included on the VAT Returns in boxes 6 and 7 respectively. Partial Exemption - VAT Recovery In addition to Output VAT that is collected by a business on its sales and then paid over to HMRC, businesses can also recover VAT on expenses they incur. The recovery of VAT depends highly on the nature of the supplies being made by the business. Business is only making Taxable Supplies (Standard rated, reduced rate or zero rated) - then the Input VAT incurred on its purchases is directly attributable to its taxable sales and can be fully recovered from HMRC. Business only makes Exempt Supplies - Then it cannot recover any of the input VAT incurred on purchases as the input VAT is directly attributable to supplies of exempt goods or services. Businesses making a mixture of Taxable and Exempt Supplies - This type of business is known as a partially exempt business and because not all of its supplies are taxable, it can only recover a calculated percentage of the input VAT it has incurred. Partially Exempt Businesses - will be required to calculate their partial exemption recovery percentage or rate and then apply this rate to their pool of input VAT that they have incurred. The standard method for calculating the partial exemption recovery rate is as follows: Taxable Sales (Standard, Zero, Reduced Rate) / Total Sales (Standard, Zero, Reduced Rate, Exempt) = VAT Recovery Rate Percentage % Example - Standard Rated Sales £1,000, Zero Rated Sales £500, Reduced Rated Sales £200 and Exempt Sales £2,000 £1,000 + £500 + £200 / £3,700 = 46 % RR If the input VAT pool is £20,000, then the business can recover £9,189 from HMRC via its VAT return. Note: Many larger and more complex businesses (such as banks) will have Partial Exemption Special Methods which will have been formulated specifically for their business and agreed with HMRC. Many businesses will have multiple internal business areas and products and as such using the standard method may not be suitable. Once formulated businesses will be required to adhere to their agreed Partial Exemption Special Methods and keep HMRC up to date on any internal business restructures that might affect the agreed method. HMRC - has the right to issue a Special Method Override where they believe the existing method in use does not produce a fair and reasonable level of VAT recovery. Annual Input VAT Adjustments As part of the VAT return process partially exempt businesses are required to complete annual Input VAT adjustments to ensure the correct amount of VAT has been recovered from HMRC for the overall year. Normally businesses will file quarterly VAT returns which include VAT recoverable for the quarter. The recovery of VAT on the quarterly returns will be based on the input VAT allocated between Taxable and Exempt sales for the quarter or based on the previous years VAT recovery rates which are being provisionally used for the current year until the annual adjustment is completed. So VAT returns completed during the year are actually provisional in terms of the recovery of VAT. As such at the end of the year input VAT recovery will need to be revisited to: Review how input VAT has been used in the business to see if there has been any change in use. (Taxable / Exempt) Recalculate VAT Recovery Rates based on the current years sales data Review input VAT allocations to different areas of the business Once the above process has been completed, the recalculated input VAT recovery for the whole year will then be compared with the input VAT reclaimed on the quarterly returns. Any under or over recovery of VAT will then be refunded or repaid to HMRC normally via the first VAT return of the following year. From a business perspective, it maybe important to carry out mid year reviews of the VAT recovery by looking at aspects such as actual VAT incurred and Actual VAT recovery rates so as to not have large swings in irrecoverable VAT which can affect P&L where the input VAT throughput is significant. (Most relevant to partially exempt businesses where VAT recovery is high). Reverse Charges Where firms purchase services from non UK suppliers that would normally have VAT applied in the UK, they will have to self account for reverse charge VAT in the UK. The purpose of this measure is to ensure UK companies have a level playing field competitively and as such ensure companies do not make their purchases abroad just to avoid paying 20% VAT. The following purchases would attract Reverse Charge VAT Legal and Accountancy services Software Advertising Consultancy For example if a UK company purchased legal services from a company in France for £1,000 then the UK company would have to include £200 on its UK VAT return as output VAT and will equally it will able to include £200 as recoverable input VAT. Note: as mentioned under partial exemption above, the level of input VAT recoverable by a business will depend on the type of sales it makes. If a firm only makes taxable (standard and zero rated supplies), then it will be able to recover the full £200 reverse charge VAT which is payable to HMRC. In this case, as the reverse charge VAT payable is equal to the reverse charge VAT recoverable and as such there is nothing to pay HMRC. If the firm also made exempt supplies to it's customers and the French legal fee charge was not related to a specific taxable supply being made by the UK company, then it would only be able to recover a portion of the £200 reverse charge VAT based on its Partial Exemption Recovery rate. On its VAT return the business would enter £200 in box 1 (Output VAT) and £200 in box 4 (input VAT recoverable) and thus box 5 ( VAT payable of recoverable from HMRC ) would be nil. The net values of the services would go in box 6 (net outputs) and (net inputs) respectively. For more information on reverse charges, please click on reverse charge button on the home page. Pre VAT Registration Expenses Where a business buys goods or services before it registers for VAT, to support taxable business activities when it is registered, it can recover the tax provided that: in the case of goods (either stock for resale or fixed assets), the goods remain on hand at the date of registration and will be used in the newly registered business. These goods must have been bought within the time limits that are set out in regulation 111; for businesses with a registration date after 1 April 2010 the time limit will be 4 years in the case of services the supply was made not more than six months before the date of registration. Six months represents a period in which it is deemed that services obtained will relate to business activity carried on at the time of registration. Tax incurred on goods on hand at registration (other than capital items - see below) cannot be deducted if the VAT was incurred outside of the time limits set out in regulation 111. This includes VAT incurred on services performed on those goods. If a business is given a backdated registration date this becomes the relevant date for working out the extent of the time limits. Businesses are not required to reduce the VAT deducted in respect of pre-registration use of fixed assets. For example, VAT incurred on a van purchased three years before registration and used before and after registration would be recoverable in full, subject to the normal rules on VAT deduction. You can only reclaim VAT on purchases for the business now registered for VAT. They must relate to your ‘business purpose’. This means they must relate to VAT taxable goods or services that you supply. Please see below HMRC link for more information. VIT32000 - How to treat input tax: pre-registration, pre-incorporation and post-deregistration claims to input tax under regulation 111 - HMRC internal manual - GOV.UK (www.gov.uk) Required VAT Records and Accounts All taxable persons must keep and preserve certain records and accounts. This VAT record-keeping requirements that anyone who is registered for VAT must comply with includes: The VAT account What records must be kept Maintaining and preserving records For more information see Record keeping (VAT Notice 700/21) . -Contains public sector information licensed under the Open Government Licence v3.0. E - Invoicing in UK from 1 April 2029 Read More VAT Digital AI VAT Explained VAT Registration Making Tax Digital Place of Supply Business Expenses VAT Invoicing VAT Accounting P&L - BS & VAT VAT - Risk Correcting VAT Errors Disbursements VAT Exemptions Importing & Exporting Reverse Charges Salary Sacrifice & VAT VAT - Employee Expenses Bad Debt Relief Motor Vehicles & VAT Self Billing Agreements VAT Automation Selling a Business Debt - (Sale of Debt) Pension Schemes Opting to Tax Property Barter & Part Exchange Capital Goods Scheme Agents and VAT Catering - Food & Drink Delivery of Goods Margin Schemes Intercompany Recharges Risk & Control Framework Business Risk Reviews Banks & VAT Barristers & VAT Charities & VAT Commodities & VAT Construction (CIS) & VAT Crypto Currencies Digital Services Global VAT Rates Energy & VAT Financial Services & VAT Insurance & VAT Intermediaries & VAT Limited Partnerships Online Market Places Supply of Staff & VAT Taxi Services & VAT VAT Number Checker VAT Groups Good & Services VAT VAT Schemes E Invoicing UK VAT IOSS Scheme Senior Accounting Officer VAT Risks - Where? Read More Business Expenses & VAT Read More Listed Places of Worship Grant Scheme - £25,000 Cap on VAT Recovery Read More UK Financial Services - VAT Explained. Explore Financial Services Product List and VAT Liability Explore Are you Self Employed or a Landlord? Making Tax Digital Applies from 6 April 2026 Explore HMRC - (P2P) Procure to Pay (Accounts Payable) Risk Mitigation Explore HMRC's Transformational Roadmap Enhanced Learning and AI Tools No MTD for Corporation Tax E Invoicing Rollout Phase out of Govt Gateway Stricter Rules for Umbrella Companies Read More Reverse Charges - How VAT Applies Read More The Sale of Debt & VAT Read More UK VAT Guide - Comprehensive UK VAT Compliance Guide. Select Topic Welfare & Care Services

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VAT digital media - Global VAT, GST, E invoicing and Key Case Law updates from around the globe. Europe VAT News Africa VAT News US Sales Tax News International VAT News VAT Digital Media - Keep up to Date with the latest VAT, GST and E Invoicing News Asia VAT News South America VAT News Global e invoicing News OECD Digital Platform Review

Global e invoicing guide - e invoicing explained including the different e invoicing models, UK, EU, Americas, Middle East and Asia timelines and updates. Electronic Invoicing Guide - e Invoicing Guide, News, Models and its Global Implementation What is Electronic Invoicing Electronic Invoicing (e-invoicing), is the process where invoices are digitally exchanged between suppliers and buyers. An e-invoice is an invoice that has been issued, transmitted and received in a structured data format which allows for its automatic and electronic processing. Electronic invoicing in Europe for businesses and Public Administrations is governed by the EU Standard on e-invoicing with its foundations based on the EU e-invoicing directive. This model has also been adopted by other non EU countries such as Australia, Singapore, Japan etc . Many countries in Europe and around the world have already implemented or are adopting e-invoicing for Business to Government (B2G) (Public Administration) and Business to Business (B2B) invoicing as they continue to move into the digital age. The below e invoicing guide provides a comprehensive Benefits of Electronic Invoicing: Eliminates the need to review paper invoices Introduces integrated electronic formats into invoicing processes Streamlines the Accounts Payable process with E2E automation for invoicing and payments Reduces risk and improves accuracy Reduces invoicing processing costs as automated Enables companies to manage their procurement and invoicing with Government Institutions more efficiently Faster processing and payment of invoices Facilitates greater Electronic Invoicing in Europe E-invoicing in the UK E invoicing as announced in the UK Autumn Budget of 2025 will be mandatory in the United Kingdom from 1 April 2029 for both B2B and B2G VAT invoicing. While e-invoices can currently be used in the UK, there are no formal standards setting out their format, content, application, or delivery. This means that there is no generally accepted model, and multiple, potentially incompatible, approaches can be in use. The exception to this is suppliers to NHS England who are required to issue e-invoices via the Pan-European Public Procurement On-Line (PEPPOL) network. Although several accountancy software providers offer e-invoicing capability in the UK, we understand that the uptake of e-invoicing is low. UK E-Invoicing: core interoperability network announcement On June 23 2026, The UK government has announced that the electronic procurement system Peppol will be the core interoperability network for e-invoicing in the UK. This will give software developers and taxpayers an indication of the direction of travel for our work towards the e-invoicing mandate in 2029, enabling them to begin planning their product development and rollout of e-invoicing. The government will continue to engage with stakeholders regarding the role of legacy systems which cannot interoperate in the future system. Why are standards important? Interoperability: They facilitate the seamless exchange and automated processing of e-invoices between businesses even if they use a different provider (like sending a text to someone on another phone network) preventing the need to use different systems for each supplier/buyer. Network effect: Interoperable systems improve business administration efficiency helping to reduce cost and administrative burdens. E-invoice standardisation reduces the work businesses need to do to onboard and maintain suppliers and buyers on their systems. With higher uptake and improved interoperability these benefits are increased. International trade: As increasing numbers of countries adopt e-invoicing models, increasing numbers of UK businesses will need to engage with international systems. Adopting a standard that supports interoperability with international trade partners could support trade and UK businesses. Current standards in the UK An example of standard setting in the UK is the NHS requirement for suppliers to use the PEPPOL standard. The PEPPOL standard is a network used globally by most EU member states, Australia, Japan and Singapore. E-invoices from suppliers in countries mandating PEPPOL and the UK’s NHS can be processed by IT systems with ease, as they share a common standard. This facilitates automated invoice processing, driving efficiencies across both international trade and domestic transactions. Other international standards PEPPOL is not the only international e-invoicing network setting standardised format. There are numerous international, and country specific standards driven by regional and national differences as well as industry specific needs. In this consultation we are not looking to identify a specific standard or standards to adopt in the UK but broader views on how standards could be used to support e-invoicing adoption and increase potential benefits. Models and approaches Voluntary / Mandated G lobally, many countries have taken different approaches to e-invoicing. This includes whether to introduce a mandate. Examples of countries who currently have voluntary models of e-invoicing for Business-to-Business transactions include Singapore, New Zealand and Australia. Each of these countries has introduced standards for software providers to adhere to, to support interoperability between businesses who choose to adopt e-invoicing. Adoption levels have varied between jurisdictions, sectors and business size. Conversely, countries across Latin America, Asia and Europe and several EU member states have introduced mandates for e-invoicing. Businesses falling within a mandate are required to issue and receive e-invoices for all relevant transactions. In the UK, a business can choose whether to adopt e-invoicing systems into their business systems. Under this voluntary system we are seeing increasing number of software providers including e-invoicing as part of their accounting packages. This does carry risk as a business does not know if their supplier will provide e-invoices or their customers will accept them, creating the potential for having to run dual systems. This may reduce the potential benefit of investment. The network effect created by a mandate could maximise the potential benefits of e-invoicing. What is included in mandates varies globally. Examples for Business-to-Business and Business-to-Government transactions could include (but are not limited to): Requiring that e-invoices are issued for all Business-to-Business supplies Requiring that e-invoices are issued for all Business-to-Government supplies Requiring all businesses over a certain size to be able to receive e-invoices Requiring all businesses over a certain size to both issue and receive e-invoice E-invoicing models When considering different models of e-invoicing, a key question is whether a model has centralised or decentralised platforms. With a centralised model, e-invoices are submitted to the tax authority before being issued to the buyer. With a decentralised model, there is no central ‘hub’ through which invoices are routed, with businesses submitting their invoices through their software providers direct to their customers. Centralised models
 Centralised models have been implemented in several countries (such as Italy and Chile) and they require the government to build a centralised system and process all invoices. This model does not always improve business efficiency and is costly for tax authorities to implement, and we do not plan to explore this model in detail. Supplier creates e-invoice and submits to the Central Platform. Central Platform receives the e-invoice and takes any required actions before issuing on to the Customer. This could include standardising, retrieving data or validating and clearing. Customer receives and processes the e-invoice. Payment issued to supplier. Decentralised models In a simple decentralised e-invoicing system, a supplier’s financial system generates an invoice for the buyer. This information is passed through the invoicing network which validates key information. This information is then passed to the buyer’s financial system where it is reconciled against the purchase details and is ready to be paid. This is also sometimes known as a 4-corner model and has been implemented in Belgium and Australia. Businesses use software providers to issue and receive invoices. When Business A issues an invoice to Business B, they upload it onto their e-invoicing platform. Business B then receives it via their platform and it automatically enters their accounting software. Business B can then check the invoice and either query it or issue payment. 4-corner’ model E-invoice created by supplier Supplier’s software provider issues e-invoice Customer’s software provider receives and processes e-invoice Customer issues payment to supplier Decentralised models can be complementary to Making Tax Digital and further build on the business and tax benefits observed in the digitalisation of business records. They also provide greater flexibility to businesses to choose a platform and supplier that fits within their business needs. Real time reporting and Continuous Transaction Controls (CTC) Both centralised and decentralised models offer the opportunity for real or near real-time reporting of transactional data to the tax authority and has been implemented in a number of countries (such as Hungary and South Korea). This data transfer could potentially be automated to support and simplify businesses tax reporting processes and improve tax compliance activity. Decentralised (5 Corner) share model may work as follows: There are variations in how this is operates in practice globally: E-invoice created by supplier Supplier’s software provider issues e-invoice Customer’s software provider receives and processes e-invoice Customer issues payment to supplier E-invoice data is shared in real time, or close to real time with the tax authority. This can occur at the same time the e-invoice is issued, or shortly after. Centralised data share model may work as follows: There are variations in how this is operates in pratcice globally: Supplier creates e-invoice and issues through the Central Platform Central Platform reads the required data and issues the invoice to the Customer Customer receives and processes the e-invoice Payment issued to supplier Real-time reporting requires businesses to submit transactional data to their tax authority in real or near real-time. CTC and Decentralised CTC and Exchange (DCTCE) models contrast to the current VAT system as they allow tax authorities to better estimate VAT income, detect discrepancies, identity fraud and support businesses to get their tax right. By building in a data feed to HMRC, it could enable HMRC to take further steps to simplify tax reporting, reduce error and support businesses to get their tax right. This could include: improving accuracy of the VAT return and facilitate nudges and prompts to reduce errors more targeted compliance activity reducing the need for compliance engagement and visits to compliant businesses supporting HMRC efficiency A data feed also provides potential wider benefits for government efficiency: provides an improved understanding of the economy possibility of using data for business support schemes (for example, in emergency situations similar data has been used to develop and implement business support) The inclusion of a data feed can also be implemented later following the creation of a decentralised system without data sharing. For more in-depth understanding of the EU e Invoicing Directive and the current status of e invoicing globally for B2G (Business to Government), G2G (Government to Government), B2B (Business to Business) and B2C (Business to Consumer), please use the links below. Europe e Invoicing Country Factsheets for each Member State and other countries (europa.eu) Malaysia Tax Authority - e invoicing https://www.hasil.gov.my/en/e-invoice/ Singapore Government Agency - e invoicing https://www.imda.gov.sg/how-we-can-help/nationwide-e-invoicing-framework For more of a detailed and interesting read on global e - invoicing and mandates and challenges faced with implementation of E - Invoicing, please see links below. E-invoicing compliance simplified: Global mandates and trends (Source - Gulf News Feb 24) 2024 Guide to Global e-Invoicing Mandates Position Paper | OpenText https://www.pagero.com/uk/blog/what-is-an-e-invoice (Note these links are displayed here for information purposes only and are not intended to convey ownership or endorsement) Please see below e invoicing country snapshots for B2G / B2B / B2C including implementation timelines. Belgium - E Invoicing Belgium - B2B E Invoicing. On 1 February 2024, the Belgian parliament approved the law implementing mandatory domestic B2B e Invoicing in Belgium as from 1 January 2026. Royal Decree published on 14 July 2025 confirms that the Peppol network will be the default method for issuing these invoices. Belize E - Invoicing Belize Budget 2026/27 - E invoicing and e receipts for B2B Mandated from 2027 As part of its modernization strategy, the Belize Tax Service will oversee the full implementation of Electronic Invoicing supported by the Inter-American Development Bank and CIAT. It is expected that this will significantly reduce opportunities for tax evasion, improve compliance, and simplify reporting obligations for businesses within the GST regime. Source - Belize Budget Presentation Estonia E Invoicing Estonia - will roll out B2B E- Invoicing in two phases. Phase 1 - July 2025 buyers can request e invoices from their suppliers Phase 2 - 2027 Mandatory E - Invoicing for all B2B transactions. France - E Invoicing Mandatory B2B E Invoicing - The issuance of e Invoices in France will be made mandatory on 1 September 2026 for large companies and mid-cap companies, and from 1 September 2027 for Small and Medium Enterprises (SMEs). From 1 September 2026, the obligation for receiving e Invoices will be mandatory for all entities. From 1 September 2026, companies will have to submit their invoices via a government-approved platform, directly or through a compliant solution. Each company must designate its platform to issue and receive its electronic invoices or declare its data. Electronic invoicing concerns all transactions between companies established in France and subject to VAT. The following are therefore subject to electronic invoicing: Supplies of goods or services situated in France which a taxable person carries out with another taxable person and which are not exempt from VAT; the advance payments relating to those transactions; deliveries at public auction of second-hand goods, works of art, collectors' items or antiques. In addition, new information will have to be added to invoices issued to 1er September 2026 for large companies and medium-sized companies (MID-caps) and 1er September 2027 for small and medium-sized companies (SMEs) and micro-companies: - The SIREN number of the customer; - The delivery address of the goods, where different from the billing address; - The information that the transactions giving rise to an invoice consist exclusively of supplies of goods or services or consist of those two categories of transactions; - The payment of VAT on debits, where the supplier has opted for it. (Source: French Tax Authority) Germany - E Invoicing - Mandatory B2B 1 Jan 2025 Mandatory B2B Invoicing introduced from 1 Jan 2025 - Transitional period - Mandatory issuance of e Invoices in Germany for companies with an annual turnover exceeding 800 000, 00 EUR will occur in 2027 and the mandatory issue of e Invoice for every B2B transaction will come into effect in 2028. Greece E Invoicing Mandatory B2G e Invoicing since September 2023 Mandatory B2B e Invoicing proposed 2 February 2026 Ireland - E invoicing Mandatory e invoicing will be rolled out in 3 phases. Phase 1 (November 2028) - Mandatory e Invoicing Real-time Reporting for B2B Domestic Transactions for VAT Registered Large Corporates. Phase 2 (November 2029) - Mandatory e Invoicing Real-time Reporting for B2B Domestic Transactions for all VAT registered businesses engaged in intra-EU trade. Phase 3 ( July 2030) - Mandatory e Invoicing Real-time Reporting for all Intra-EU B2B Transactions for all VAT registered businesses engaged in intra-EU trade Italy - E Invoicing Mandatory E invoicing - As of January 2019, e Invoicing in Italy has been mandatory for B2B and B2C among Italian operators. . Luxembourg E Invoicing B2G - Mandatory Since 2022. B2B - Proposed timeline for domestic transactions is: * 1 January 2028 - Mandatory for all businesses to receive electronic invoices * 1 July 2028 - Mandatory for medium sized and large businesses to issue electronic invoices * 1 January 2029 - Mandatory for all businesses to issue electronic invoices Malaysia - E - Invoicing Mandatory E - Invoicing from 1 August 2024 for larger entities then phased in stages to end of 2025. Timeline * Taxpayers with an annual turnover or revenue of more than RM100 million - 1 August 2024 * Taxpayers with an annual turnover or revenue of more than RM25 million and up to RM100 million - 1 January 2025. * Taxpayers with an annual turnover or revenue of more than RM500,000 and up to RM25 million - 1 July 2025. * Taxpayers with an annual turnover or revenue of up to RM500,000 - 1 January 2026 Netherlands - E - Invoicing B2B Mandatory E-Invoicing from 1 July 2030 & Digital Reporting for Domestic Transactions from 1 July 2031 Nigeria E - Invoicing The Federal Inland Revenue Service (FIRS) will begin rolling out E invoicing in Nigeria using the Merchant Buyer Solution (MBS) platform from 1 August 2025. Larger taxpayers or companies with revenue of N5bn or over have been granted an extension to 1 November 2025 to onboard onto the MBS. For more information on how the MBS will operate, please visit https://einvoice.firs.gov.ng/ Norway E-Invoicing Norway Proposes Mandatory B2B E invoicing from 1 January 2027. (Brought forward from 1 Jan 2028) 1 January 2030 - Fully Digitalised accounting / bookkeeping system requirements Oman - Mandatory E Invoicing From 1 April 2027 Oman - Mandatory E Invoicing (Phase 1) from 1 April 2027 for VAT registered businesses with annual turnover greater than OMR 5m and (Phase 2) from 1 October 2027 for VAT registered businesses with annual turnover of OMR 5m or less. Pakistan - E invoicing Pakistan - Federal Board of Revenue - Mandatory e invoicing for all sales tax registered businesses to be introduced in phases from September 2025. https://download1.fbr.gov.pk/SROs/2025811681810559SRO1413.pdf Poland - E Invoicing. E Invoicing B2B - Mandatory e Invoicing for all commercial transactions (B2G and B2B) e Invoicing from April 2026. Portugal E - Invoicing The European standard on e invoicing The European standard on e Invoicing is fully implemented. Electronic invoicing is mandatory for B2G relations between suppliers and public administrations. B2B e invoicing is still optional and private companies can use PDF invoices or decide whether to adopt electronic invoicing. However, as of January 1, 2026, a Qualified Electronic Signature (QES) or a Qualified Electronic Seal will be mandatory for PDF invoices in B2B and B2C transactions. So while companies can currently use PDF invoices, they will need a QES from January 1, 2026 issued to taxpayers by certified third-party provider to be considered compliant. Romania - E Invoicing Romania - B2B E Invoicing Mandatory from 1 July 2025. San Marino - E - Invoicing - Mandatory e - invoicing will be introduced for domestic B2B transactions from 1 Jan 2027. - Mandatory cross border e - invoicing for goods between San Marino and Italy since July 2022. Singapore - E - Invoicing Mandatory E - Invoicing for new companies from 1st November 2025. E-Invoicing Journey - Singapore * 2018 - IMDA adopted Peppol as the standard for the nationwide e-invoicing initiative and became the first Peppol Authority outside of Europe. * 2019 - The network was launched with 11 Access Point providers. * 2020 - The Government public procurement was connected to Peppol, providing an additional channel for Government vendors to issue invoices to Government. * 2021 - IMDA rebranded Peppol to InvoiceNow in Singapore, drawing on the public’s familiarity with PayNow, the widely adopted e-payment system in Singapore. * 2022 - IMDA introduced additional document types – purchase order and invoice response, on the InvoiceNow network, aiming to further streamline the procure-to-pay process for businesses. * 2023 - The Government announced the plan to make InvoiceNow the default channel for public procurement in the next few years. * 2024 - IRAS announced the GST InvoiceNow Requirement, which requires GST-registered businesses to transmit invoice data to IRAS via the InvoiceNow network. The requirement will be implemented progressively, starting from November 2025. * 2025 - Progressively implementation of e invoicing starting from November 2025. Source - Singapore Gov Agency Slovakia - E invoicing Slovakia has had mandatory E - invoicing for B2G since 2022 and mandatory B2B e - Invoicing will commence from January 2027. Slovenia E - Invoicing * B2G - e invoicing has been mandatory in Slovenia since 1 January 2015. * B2B - e invoicing will be mandatory in Slovenia from 1 January 2028. South Africa - E-invoicing South Africa - E - Invoicing mandatory from 2028 with real-time reporting of transactions. SARS proposes in its consultation (Aug 26) to use 5 corner decentralised model (Peppol) for e-invoicing in South Africa with real-time e reporting to the tax authority and pre-filled tax payer VAT returns. Spain E Invoicing E Invoicing B2B Law 18/2022 - Businesses with total revenues of 8 million Euros or more a year will be required to comply with the mandate by July 2025 and other businesses a year later in 2026. ( 24 March 2026 Council of Ministers adopt Royal Decree mandating electronic invoicing) UAE - E - Invoicing Mandatory E - Invoicing for all transactions from July 2026. Feb 26 Ministry of Finance Publishes E invoicing Guidelines. See Link UAE Electronic Invoicing Guidelines United Kingdom - E Invoicing Autumn Budget 2025 - UK E - Invoicing for B2B and B2G will be Mandatory from 1 April 2029. https://www.gov.uk/government/consultations/promoting-electronic-invoicing-across-uk-businesses-and-the-public-sector/outcome/promoting-electronic-invoicing-across-uk-businesses-and-the-public-sector-consultation-response#foreword

Global VAT News - Get a round up of the latest UK, EU and Global VAT news including HMRC and Tax Authority updates, UK Tax Tribunal, Supreme Court & CJEU case updates. Global VAT News - VAT News, stay up to date with the latest UK, EU, Asia, Africa and Americas VAT News and articles. Outlined in the VAT news galleries below are summaries of the latest VAT news items and Tribunal / Court cases in relation to VAT and there is a separate section for global news items, updates and court cases relating to VAT with relevant links provided. The world of VAT and GST is rapidly changing, driven by the increased focus on digitalisation, e-invoicing, and tax authority focus on the tax gap and harmonisation. The EU's VAT in The Digital Age package (VIDA) reforms will become mandatory from 1 July 2028 with e invoicing for B2B inter EU transactions becoming mandatory from 1 July 2030. The UK Chancellor announced as part of the 2025 Autumn budget that e invoicing will be mandatory in the UK for B2B and B2G VAT invoicing from 1 April 2029. E invoicing in particular has been mandatory for years in many South American nations such as Chile, Argentina, Brazil, Columbia and in some European countries such as Italy. European countries such as Germany, Romania, Poland have adopted mandatory e invoicing more recently. In Africa, Kenya, Nigeria, Egypt, Uganda and Tunisia have all adopted and implemented mandatory e invoicing. Latest UK VAT News VAT News - 10 September 2026 - HMRC issues GFC20 Guide - VAT on Fund Management Services - How to determine the correct VAT treatment of outsourced fund management services. The guide sets out HMRC’s recommended approach for the correct VAT treatment of outsourced fund management services, including whether services should be treated as single or multiple supplies. See link below. Help with VAT on fund management services — GfC20 VAT News - 26 July 2026 - UK Government announces temporary (6 months) cut to the rate of VAT on domestic electricity from (5% to 0%) From 1 Oct 2026 The United Kingdom Government (new Prime Minister) announced on the 26 July 2026 that VAT on domestic electricity will be cut from 5% to 0% from 1 October 2026 for 6 months. The reduction is expected to apply to: Domestic Customers (households) Businesses that consume electricity within the de minimis level (33 kilowatt-hours (kWh) per day or 1,000 kWh per month) Residential Care Homes Charities - Non Business Electricity Use Other ancillary and inseparable electricity related supplies that are currently covered under qualifying use Points to note are: The change will not apply to domestic gas consumption The change will likely widen the disparity between the VAT on domestic driveway electricity charging (5% to 0 %) and charging at public charging points where 20% VAT is applicable. See below announcement link. New PM cuts tax on household electricity bills to give ... HMRC Guidance on how the VAT rate should be applied to pre and post 1 October 2026 consumption is set out in notice VFUP3100. (See below extract). For supplies spanning a change of VAT rate, businesses may normally choose to adopt the rate or liability in force at the basic tax point. But as there is no basic tax point for supplies of electricity or piped gas, our policy on previous occasions has been to accept an apportionment based on: A meter reading by the customer or the supplier (this takes precedence, if known); The number of days before/after the change of rate; or The number of days before/after the change of rate, but weighted for seasonal use. This method - generally based on the supplier’s billing system that estimates consumption - should be agreed between HMRC and the supplier. VAT News - June 2026 - HMRC Update on VAT Recovery for funded Occupational Pension Schemes HMRC have updated their guidance on the recovery of input VAT incurred directly by the employer in relation to its funded occupational pension scheme as follows: Input tax incurred by an employer on services provided in relation to its funded occupational pension scheme will be the employer’s input tax. This input tax is considered an overhead, as it is directly linked to the employer’s business as a whole. It is therefore recoverable in full, subject to any partial exemption restrictions. This treatment is the same whether the costs incurred relate to administration or management of the scheme’s investments. If the employer contracts directly with a provider of fund management services, then it can deduct the input tax incurred, with the normal evidential requirements, such as an invoice in its name (an invoice ‘care of’ will be acceptable for this requirement, and alternative evidence may be considered in line with guidance at VIT31200). Invoices correctly made out to a Trustee, and not the Employer may not be re-issued to the sponsoring employer, in line with normal VAT invoicing rules. Any input tax on them is the Trustees to be deducted in line with their Partial Exemption recovery position. If the contract for management services is between the fund manager and the trustees, then for the employer to deduct, the trustees should make a taxable charge to the employer for their services of running the scheme on the employer’s behalf. The employer will then be able to deduct input tax on this charge. As per normal VAT rules, issuing an invoice which is not paid does not give a right to recovery. A payment must be made; an agreement to make contributions does not provide proof of payment of VAT invoices. There are two routes for an employer to evidence that they paid the costs of running a scheme: Invoices from the fund managers issued to the employer directly which they paid or deducted from the pension pot; either is acceptable as long as the employer holds an invoice and can evidence the payment; or The Trustees of the scheme incurred all of the costs (unable to recover because they did not incur costs for their taxable business activity) and raise a taxable charge for managing the scheme to the employer, so that they hold a valid invoice. Source - HMRC Input VAT manual VIT44650 - Link - VIT44650 - Specific issues: Attribution of VAT on services .. . VAT News - May 2026 - Temporary Introduction of Reduce Rate VAT of 5% The Government has announced the introduction of a temporary reduced rate of VAT (5%) for supplies of children’s meals and tickets to certain attractions, intended to reduce the cost of selected activities and services for families with children during the summer holiday period. The reduced rate will apply from 25 June 2026 to 1 September 2026 (inclusive). The reduced rate for children’s meals and children’s tickets for cinemas, theatres, exhibitions and shows covers those supplies that are marketed, priced and presented as intended for children. These do not generally apply to supplies aimed at adult customers, except where those supplies form part of a qualifying family package as described in this brief. The reduced rate will apply to tickets for all customers for attractions set out within this brief. This cut in VAT rate from the standard rate of 20% will be introduced by statutory instrument and have effect on admissions from 25 June 2026 to 1 September 2026 and will apply to the following supplies (where conditions are met): Children’s meals Children’s cinema, theatre, show and concert tickets Admission to certain attractions Read More: Temporary reduced rate of VAT for children's meals, tickets ... VAT News - 18 June 2026 - Beritaz Care Group vs HMRC - FTT Beritaz Care Group submitted an application to add a care home to its VAT Group (back dated 4 years) and HMRC missed the 90 day cut off to refuse the application which meant VAT grouping was deemed at that date rather than the earlier back dated date on the submitted VAT group application. The FTT ruled that it had no jurisdiction in law to back date application before the deemed date. See attached link to FTT decision below: Beritaz Care Ltd v Revenue and Customs (VAT - Grouping UK VAT News - Latest UK VAT News headlines 10 Sept 26 - HMRC issues GfC20 - VAT liability on Fund Management Services and Outsourced Fund Management Services. ( Single or Multiple Supplies) 8 Sept 2026 - UK VAT refunds for non-UK. All non-UK businesses that are members of a VAT group must submit their own claim for any UK VAT they incur. HMRC will no longer accept claims from a representative member unless that representative member incurred the VAT. 2 Sept 2026 - HMRC Brief 9, VAT liability of supplies of education by alternative providers of higher and further education. Following the Court of Appeal’s decision, HMRC recognises that some businesses may want to protect their position, pending the outcome of the appeal to the Supreme Court. July 21 2026 - UK Government announces temporary cut (6 months) to the rate of VAT on domestic electricity from 5% to 0% from 1 Oct 2026 . 8 July 2026 - Capital Goods Scheme Simplification. HMRC announces that from 29 July 2026, computers and items of computer equipment will be removed from the list of assets covered by the scheme. The expenditure threshold for land, buildings and civil engineering work will increase from £250,000 (exclusive of VAT) to £600,000 (exclusive of VAT). 23 June 2026 - The UK Government has announced that the electronic procurement system Peppol will be the core interoperability network for e-invoicing in the UK. This will give software developers and taxpayers an indication of the direction of travel for our work towards the e-invoicing mandate in 2029, enabling them to begin planning their product development and rollout of e-invoicing. The government will continue to engage with stakeholders regarding the role of legacy systems which cannot interoperate in the future system. 23 June 26 - UK Government announces plans to bring forward plans to scrap duty relief on cheap imports valued at £135 and also review how online sellers pay VAT to clamp down on dodgy traders. The aim is to create a level paying field between the UK high street and online sellers. As part of this review, the Government will consult on reforming VAT on land for new social housing, helping speed up delivery of affordable homes. 18 June 2026 - FTT Case -Beritaz Care Group vs HMRC - Beritaz submitted an application to add a care home to its VAT Group (back dated 4 years) and HMRC missed the 90 day cut off to refuse the application which meant VAT grouping was deemed at that date. FTT ruled that it had no jurisdiction to back date application before the deemed date. 8 June 2026 - Barclays Services Corp vs HMRC - UTT upholds HMRC's refusal admit BSC to the BBPLC VAT Group. Fixed Establishment Case June 2026 - HMRC VS Bolt Services UK Limited. The UK Court of Appeal passed judgment in favour of HMRC in its appeal against the earlier UTT ruling that Bolt Services UK Limited was able to use the "Tour Operators Margin Scheme" to only account for VAT on the margin on customer journeys via its App as it was intended for the travel agent industry. April 2026 - Domestic Reverse charge does not apply to the supply of electricity at a charging point for electric vehicles. This is because either the vehicle user is not VAT registered, or because it is not a wholesale supply. This applies whether or not the electricity is supplied at a public charging point. Paragraph 3.2 describes wholesale as having an ordinary meaning where the supply is business to business and there is little or no consumption of the supply. Electric vehicle charging does not fall within this definition. HMRC to Appeal FTT Decision - Feb 2026 Ruling that 5% VAT should apply to EV charging in Public Places where consumption is below 1000 kwh / month for a customer. May 2026 - Colchester Institute vs HMRC - Court of Appeal - Grant Funding from Gov't agencies such as SFA/ EFA for building works was consideration for educational services and thus Vatable as there was a direct link between grant funding and the supply of educational services. Mar 26 - The UK VAT Gap (difference between the VAT HMRC expects vs receives) widens by £3bn for 2024/25 from initial estimate of £8.9bn to £11.9. Carbon Border Adjustment Mechanism - HMRC Technical Consultation on Draft Legislation open until 24 March 2026. UTT - Feb 26 - Upholds FTT decision in Lycamobile vs HMRC case confiming that payment for plan bundles are subject to VAT immediately and not when customers access or use associated benefits. Feb 26 - British Independent Retailers Association (BIRA) and coalition of key retailers and tax experts write to UK Treasury calling for consultation on online VAT reform. HMRC - Guidlines for Software Developers using Generative AI Products used for Tax & VAT Reporting Budget 2025, Climate Change Levy Exemption for electricity used in electrolysis to produce hydrogen and natural gas used as a source of carbon dioxide to produce sodium bicarbonate from soda ash will be exempt from the Climate Change Levy (CCL) From 2 Jan 2026, Online Taxi operators can no longer use the Tour Operators Margin Scheme loophole. VAT must be paid on full ride fare. (Not commission only) FTT - Rules that the supply of Locum (temporary medical staff) is exempt under 5, Group 7, Schedule 9, VAT Act 1994. ICAEW - Finance Bill Threat to Tax Advisors 2026 - Read ICAEW Article! Electronic Invoicing will be Mandatory in the UK from 1 April 2029 for all B2B transactions. Autumn Budget UK 2025 - Key VAT & Tax Changes. HMRC Issues New VAT Grouping Rules For Overseas Establishments Global VAT News - Global VAT News Headlines September 26 - Netherlands confirms plans to introduce mandatory B2B e-invoicing for domestic transactions from 1 July 2030 and e reporting from 1 July 2031. 18 Aug 2026 - South Africa VAT modernisation consultation including proposed mandatory e invoicing (5 corner Peppol model) and e reporting. June 26 - OECD - Proposed targeted amendments to the Model Reporting Rules for Digital Platforms to support exchange of tax information June 2026 - Moldova to introduce VAT on international purchases from online market places to protect domestic traders. All goods will be subject to VAT at 20% from 1 October 2026. May 2026 EU Court of Justice rules that Stellantis Portugal - Inter-company Transfer Pricing adjustments with local dealers were not vatable supplies and thus VAT was not due. Mar 2026 - European Commission launches public consultation on the revision of the eInvoicing Directive Mar 2026 - From 10 April 2026, Gibraltar is introducing a new Transaction Tax of 15% on imported and locally Manufactured goods. The rate will rise to 16% in 2027 and 17% in 2028. Mar 26 - South Africa announces increase in VAT registration threshold from R1m to R2.3m and the voluntary registration threshold from R50,000 to R120,000, effective 1 April 2026. UAE Ministry of Finance - Feb 26 - Publishes E Invoicing Guidlines. Nigeria Revenue Service (Feb 26) Implementation time line guide for e invoicing (MBS) guide. British Columbia - From 1 October 2026 - Provincial Sales Tax (PST) applicable to Accounting, Architectural, Engineering, Security Services, Property Management Services. Also PST Exemptions for Basic Cable Television, Residential Landline Telephone Services, and some Clothing and Footwear items will be Eliminated. CJEU AG Brkan opinion on the VAT treatment for the Management of Credit where the loan has been sold (Securitisation). Where Credit Management Services continue to be provided by the original loan issuer, the services are not Exempt under art. 135(1) (b) EU VAT Directive. (Basically Taxable) Lebanon - VAT increased From 11% to 12% to fund increases in Public Sector Pay. OECD - Digital Continuous Transaction Reporting - Jan 2026 Mauritius Revenue Authority - Foreign suppliers of Digital or Electronic Services in Mauritius must register with the MRA and account for VAT in Mauritius EU Council agrees to levy 3 Euros on small parcels valued at less than 150 Euros entering the EU from 1 July 2026. UAE - Ministry of Finance - From 1 Jan 2026 -VAT Changes to Reverse Charge Invoicing & 5 Year Limit to Input Tax Recovery. RCV - Applies to Scrap Metal Trading From 14 Jan 2026. European Commission Releases Report "Mind the Gap" Estimating the EU VAT compliance gap is EUR 128bn. Portugal Introduces VAT Grouping for Tax Periods Starting 1 July 2026. This will allow VAT amounts owing and recoverable to be netted within the group. However inter-group transactions remain Vatable. Ireland - VAT Groups - Only Branches and Head Offices Established in Ireland Allowed. CJEU - Arcomet Towercranes - Transfer Pricing adjustments - Potentially Vatable India GST Reforms - 2025 Russian Ministry of Finance - Raising VAT rate From 20% to 22% from 1 Jan 2026. Sweden will Temporarily reduce VAT on Food From 12% to 6% from April 2026 OECD - Tax Administration and Digitalisation Report 2025

Use our online VAT Calculators to determine the VAT applicable locally on your supplies of goods and services in the UK, EU and other major jurisdictions. VAT Calculators - UK and Global VAT Calculators Our aim at VAT Digital.Com is to help businesses and individuals demystify VAT by providing them with relevant and up to date news and information, AI and other calculation tools to simplify VAT reporting and help them stay compliant with Tax Authorities. As such we have built a range of free to use VAT calculators to enable you to quickly determine VAT amounts for different VAT reporting scenarios. UK VAT Calculator Use this calculator to determine what the VAT amount should be on your invoices or ascertain the VAT amount included within a gross amount on an invoice. EU VAT Calculator Use this calculator to determine what the VAT rate, VAT amount and VAT inclusive total should be for invoicing for specific EU countries. Domestic Reverse Charge VAT Calculator Use this calculator to determine what the domestic reverse charge VAT amount should be for goods and services subject to UK domestic reverse charge legislation including which boxes to include amounts in on your VAT returns. Use the slider to set the applicable VAT rate.

Read our Comprehensive Europe VAT guide including the One Stop Shop process, Cross Border VAT Refund for EU businesses, Small Business Scheme, VAT in the Digital Age etc. Europe VAT Guide - Europe VAT - Guide for Businesses Operating in the EU European Union The European Union (EU) is a political and economic union of 27 countries. It comprises a single market which allows free movement of goods, capital, services and people between member states. The EU countries include: Austria, Belgium, Bulgaria, Croatia, Republic of Cyprus, Czechia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden. Value Added Tax (VAT) The Value Added Tax (VAT) is a consumption tax levied on nearly all goods and services bought and sold and brought into the EU and is ultimately borne by the final consumer. VAT is charged, at the applicable rate, on the sales price of the goods or services. VAT is collected at each stage along the supply chain. It is charged on the value added to goods and services at each stage of production and distribution based on a standard set of invoicing rules. Each EU country is responsible for setting their own VAT rates but the standard rate cannot be less than 15% and the reduced rates cannot be less than 5%. VAT-registered businesses can deduct the VAT they have incurred on purchases from other EU & Non EU businesses from the VAT they have collected from businesses they have sold goods or services to. This means where a business makes purely taxable sales (not Exempt) they are tax neutral in that there is no VAT loss or P&L VAT cost. To calculate VAT on the net sale price in a EU country, please use our To validate an EU VAT Registration number to ensure its not fraudulent, please see our VAT number checker page Taxable Transactions in the EU Under the VAT Directive, a taxable transaction is a transaction that is subject to VAT. Not all taxable transactions are taxed - some can be exempt. EU rules recognise 4 types of transactions on which VAT is chargeable (Article 2(1) VAT Directive): Supply of goods in an EU country by a business Supply of services Intra-Community acquisition of goods Importation of goods Except for imports, for a transaction to be liable for VAT, it must involve consideration (e.g. payment). However, to prevent avoidance, evasion or distortion of competition, some transactions that do not involve payment are also treated as taxable. Supply of Goods in the EU Main rule: a supply of goods is the transfer of the right to dispose of tangible property as an owner (Article 14(1) VAT Directive) Other transactions considered as supply of goods are (Article 14(2), VAT Directive): the transfer, by order made by or in the name of a public authority or in pursuance of the law, of the ownership of property against payment of compensation; the actual handing over of goods pursuant to a contract for the hire of goods for a certain period, or for the sale of goods on deferred terms, which provides that in the normal course of events ownership is to pass at the latest upon payment of the final instalment; the transfer of goods pursuant to a contract under which commission is payable on purchase or sale In addition, EU countries may regard the handing over of certain works of construction as a supply of goods (Article 14(3) VAT Directive). Supply of Services in the EU Main rule: a supply of services is any transaction which does not constitute a supply of goods (Article 24 VAT Directive) Intra - Community Acquisition of Goods An intra-Community acquisition of goods is the acquisition of the right to dispose as owner of movable tangible property dispatched or transported to the person acquiring the goods, by or on behalf of the vendor or the person acquiring the goods, in a EU country other than that in which dispatch or transport of the goods began (Article 20, VAT Directive). On an intra-Community acquisition of goods, the acquirer is liable to pay the VAT under the reverse-charge mechanism. Example: A French company orders an aircraft part from a German manufacturer. The manufacturer arranges for the part to be air-freighted to the French company’s factory in Toulouse. The French company has made an intra-Community acquisition of goods. The manufacturer, on the other hand, has made an exempt supply of goods. Importation of Goods into the EU The importation of goods is a taxable transaction. Anyone who imports goods into the EU (business, non-taxable legal entity - such as a public body, private person, etc.) is liable for VAT on the transaction. Under EU VAT rules, import means the entry into an EU country of: Goods which are not in free circulation Goods which are in free circulation from an EU customs territory not covered by EU VAT rules (Article 30, VAT Directive) Free circulation means: The goods have complied with all import formalities The country of importation has levied any customs duties or equivalent charges due (with no total or partial drawbacks) VAT in The Digital Age (VIDA) Europe VAT in The Digital Age is an EU package adopted in March 2025 which aims to modernise the VAT system in line with digitalisation, reduce fraud and make the system more efficient for businesses. The package is made up of 3 main pillars with an implementation timeline between 2025 to 2035 an include: Real time Digital Reporting Requirements for cross border (B2B) EU trade based on e-Invoicing using structured electronic invoices for real-time digital reporting.The timelines for implementation are (a) 14 April 2025 - EU Member States can introduce mandatory domestic e invoicing without requiring EU approval (b) 1 July 2030, E-invoicing will become mandatory for all cross-border B2B transactions in the EU. (c) 1 January 2035, all domestic e invoicing and reporting must align with the EU standard. Platform Economy - There will be new rules for online platforms in the short-term accommodation rental and passenger transport sectors. Platforms facilitating supplies in the passenger transport and short-term accommodation sectors will become responsible for collecting and remitting VAT to tax authorities when their users do not, for example because they are a small business or individual providers. This will become effective from 1 July 2028. Single VAT Registration - Building on the already existing ‘VAT One Stop Shop’ (OSS) model for e-commerce, the proposals would allow more businesses selling to consumers in another EU country to fulfil their VAT obligations via an online portal in one EU country. Further measures to improve the collection of VAT include making the ‘Import One Stop Shop’ (IOSS) mandatory for certain platforms facilitating sales by persons established outside the EU to consumers in the EU. This will become effective from 1 July 2028. In May 2026, the European Commission has published the work programme for VAT in the Digital Age (ViDA), covering implementation activities planned for 2026. See link to information : VAT in the Digital Age: 2026 Work Programme available EU Cross Border Refunds for EU Businesses EU businesses can claim and obtain refunds of VAT incurred in performance of their business in other EU member states where they do not supply goods and services.and are not VAT registered there. So in effect, businesses should not have been based in the respective EU Member State during the period the refund claim relates to, or supplied goods and services (including to customers required to apply the reverse charge procedure). Requests for refunds must be made to the claimants own country Tax Authority via their online portal where they will be checked for their validity and the claimants identity and VAT registration number will also be verified. Once verified, claims will be forwarded by the businesses Tax Authority to the Member State where the VAT was incurred provided: The claimant is a taxable person Does not supply only exempt goods and services Is not covered by the special scheme for small business Is not covered by the flat rate scheme for Farmers For more information on the refund procedure, see the Summary of VAT refund procedure Source; European Commission EU Changes From 1 January 2025 Place of supply for Virtual / live Streamed Events On 1 January 2025 EU VAT rules change for businesses providing virtual and streaming services for conferences, distant learning and other live events streamed online (with a fee for viewing). From 1 Jan 2025, EU countries must apply the 'where services are consumed' rule and VAT will be accountable in the country of the recipient of these services. This change basically aligns the VAT treatment of virtual services with electronically supplied / digital services. Currently the general B2C rule applies - so VAT is due the supplier's country. Businesses in the EU providing these services will need to update their billing systems to reflect this change so that VAT will not be applied locally. Recipients of these services will need to ensure they account for VAT locally on these services. Small Business (SME) VAT Exemption Scheme From 1 January 2025, the special VAT regime (the SME scheme) allows small enterprises to: sell goods and services without charging VAT to their customers (VAT exemption) and, alleviate their VAT compliance obligations. Small enterprises choosing VAT exemption will lose the right to deduct VAT on goods and services used to make exempt supplies. Who Can Benefit Any small enterprise with a total annual turnover of no more than EUR 100 000 (or the equivalent in national currency) in all Member States in the current calendar year and in the previous calendar year are eligible for the VAT exemption in its Member State of establishment (MSEST) and/or in other Member State(s) under the cross-border SME scheme. This is applicable only if the Member State concerned has implemented the scheme in its national legislation. The SME scheme is optional. Non-EU small enterprises cannot apply the SME scheme. In the context of the SME scheme, small enterprises established in the United Kingdom, including Northern Ireland, are non-EU small enterprises. New Maximum for National Annual Threshold The maximum national annual threshold set by Member States under which small enterprises can VAT exempt their supplies of goods and services under the SME scheme (domestic and cross-border) is EUR 85 000 (or the equivalent in national currency). Member States have the possibility to set more than one national annual threshold. These are called ‘sectoral thresholds’. In case a small enterprise can benefit from more than one sectoral threshold, the tax authorities will, based on its activities, inform the small enterprise about the threshold to use since only one threshold can be applied per taxable person. Cross Border Application Small enterprises established in another Member State than where VAT is due can VAT exempt their supplies (cross-border), in the same way that small enterprises established in that Member State already can for domestic transactions. This will help place all small enterprises on an equal footing, whether they are based in that Member State or not. For more information please use this link - VAT rules for small enterprises Distant Selling - VAT Rules The distance selling VAT rules in the EU require businesses selling physical goods online or via mail order including digital services to consumers (business to consumers - B2C) in other EU countries to apply the VAT rate of the buyer's destination country once their total EU wide cross-border sales exceed €10,000 per year. However, provided a businesses EU wide sales do not exceed €10,000 per year, they should charge the VAT rate applicable in their own local EU country for such distant sales. Where the €10,000 per year threshold is exceeded, then EU VAT registered businesses should use the Union (OSS) Scheme (see below) to allow them to register and pay for VAT in one EU country for all EU wide sales. The EU One Stop One Stop Shop Scheme The EU One Stop Shop scheme allows online sellers, including online marketplaces and platforms to register in one EU Member State (member state of identification) for the declaration and payment of VAT on all distance sales of goods and cross-border supplies of services to consumers within all EU member states. This option therefore removes the need for online sellers / marketplaces / platforms to register and declare VAT in each EU country where they have made distant sales. This therefore reduces the administrative burden for taxable businesses making cross border sales from outside or within the EU. The One Stop Shop consists of three optional schemes namely Non-Union (OSS) Scheme - Is for Non EU Businesses (Company, Partnership, Sole Trader) that do not have an established place of business in the EU or a fixed establishment in the EU and provide Business to Consumer (B2C) services in the EU such as accommodation, transportation, admission to events Union (OSS) Scheme - Is for EU e-commerce businesses that have an established place of business in EU or have a fixed establishment) selling B2C goods or services within the EU. Services such as telecommunications, broadcasting, or electronically supplied services and intra-Community distance sales of goods. Import (IOSS) Scheme. Is for EU established or non EU established businesses that sell low value goods of up to 150 euros imported into the EU. Note - for businesses that are not established in the EU, are required to appoint a representative or intermediary before they can use the IOSS scheme. Registration for IOSS To use the Import One-Stop Shop, the company carrying out distance sales of goods imported from third territories, or third countries must register in the Member State where it has established its business, or, if it has established its business outside the Community, in one of the Member States where it has a fixed establishment. There are no VAT advantages in choosing one Member State over the other. VAT Return A taxable person using the IOSS is required to submit a monthly VAT to the Member State of Identification detailing: Total taxable amount for each product supplied to each Member State in which the dispatch or transport of the goods to the customer ends. VAT amount 3) VAT rate The import declaration shall contain the valid IOSS Identification number of the taxable person or of the appointed Intermediary established in the Union. Member State of Identification tax authorities provide the VAT return information to each Member State mentioned on the VAT return in which the dispatch or transport of the goods to the customer ends. VAT Payments The company pays the VAT declared in its VAT return, to the Member State of Identification tax authorities. Member State of Identification distributes the VAT to the Member States mentioned on the VAT return. Registration Process Direct Registration in the Member State of Establishment Any taxable person who carries out distance sales of goods imported into the EU from a third territory or a third country in consignments with an intrinsic value not exceeding EUR 150 can register for the Import scheme. If that person has no establishment in the EU, they need to appoint an Intermediary to be able to use the scheme. For the Import scheme, the Member State of Identification is the Member State in which the taxable person has established their business. About the Intermediary Taxable persons, suppliers, and electronic interfaces, which are not established in the EU or in a third country with which the EU has concluded a VAT mutual assistance agreement, need to appoint an Intermediary to be able to use the Import scheme. Other taxable persons, the ones established in the EU, are free to appoint an Intermediary, but are not obliged to do so. The Intermediary needs to be a taxable person established in the EU. They must fulfil all obligations laid down in the Import scheme for the supplier or electronic interface that appointed them, including the submission of IOSS VAT returns and payment of VAT on the distance sales of imported low value goods. Direct registration with Intermediary and in the Member State of Identification If the taxable person has not established their business in the EU, the Member State of Identification is a Member State in which the taxable person has a fixed establishment. Where the taxable person has more than one fixed establishment, that taxable person can choose any Member State in which they have a fixed establishment to be their Member State of Identification. I f the taxable person is established outside the EU, but in a third country with which the EU has concluded an agreement on mutual assistance for the recovery of VAT and makes distance sales of imported goods from that third country, they are free to choose any Member State as Member State of Identification. In this case, there is no need to appoint an Intermediary to be able to use the Import scheme. For more information please see link below to source information: IOSS Scheme - Customs & Tax EU Learning Portal Sources of Information - EU Commission Matrix of Supply Type and Applicable OSS Scheme Type of Supply Supplies of Services to Consumers (B2C) Distant supplies of goods by deemed suppliers Domestic supplies of goods by deemed suppliers Distant sales of imported goods from 3rd countries in consignments not more than EUR 150 Non - EU Established Entity Non Union Scheme (OSS) Union Scheme (OSS) Union Scheme (OSS) Import Scheme (IOSS) and Intermediary Required (Fiscal Rep) EU Established Entity Union Scheme (OSS) Union Scheme (OSS) Union Scheme (OSS) Import Scheme (IOSS) and Intermediary Required (Fiscal Rep) VAT Calculator

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World VAT Guides. Global VAT guides on how VAT and GST is applied in different countries. Including VAT and GST rates, VAT rules, the VAT and GST liability of goods and services. GLOBAL VAT Guides - Country VAT Guides - How VAT Applies VATDIGITAL.COM - Explore our Global VAT Guides for information and updates on VAT and GST rules and how they are applied to locally and international transactions including to non domiciled entities. Australian - GST Austria - VAT Canada - GST / HST China - VAT Denmark - VAT Germany - VAT EU - VAT French - VAT Estonia - VAT Ireland VAT Italy - VAT Japanese Consumption Tax Show More Argentina - VAT Chile - VAT Jersey - VAT Show More VAT For Businesses - EU Explore Luxembourg - VAT Nigeria - VAT Ghana - VAT South Africa - VAT Netherlands - VAT Norway - VAT Portugal - VAT Singapore - GST Spain - VAT Israel VAT Saudi Arabia - VAT Switzerland - VAT Show More Poland VAT India - VAT Kenya VAT Show More Ecommerce - Online Traders - EU One Stop Shop Explore

Careers in VAT - VAT careers, discover what its like to work in VAT including practice and industry roles, skills and experience required and useful job interview techniques. CAREERS IN VAT - VAT Careers What You Need to Know VAT & GST is a very specialised subject area of Tax and is widely referred to as "indirect Tax". Although VAT can generally be perceived as less complicated in that many see it as just a rate applied to the purchase of goods and services, there are many areas of VAT that require specialist training and oversight. If you're considering a career or want to gain exposure to VAT, please use the links below to help you on your journey. For a more detailed understanding of UK and Global VAT / GST, please refer to the wider material contained on this site or use our "AI Advisor" to obtain answers to any queries you may have. WORKING IN VAT RECRUITMENT CONSULTANTS MARKET & SALARY GUIDES VAT Digital. Com Making VAT Simple - Online 24/7

Banking and VAT - Explore how VAT applies to products and services in Banking and the the different VAT allocation and recovery models used. Introduction The world of banking can cover a broad spectrum of areas that can typically operate under a banking institutions umbrella. Traditionally banking was represented by retail and commercial banking where the main businesses was to provide a sanctuary for individual and commercial savings and at the same time provide loans and finance to individuals and businesses. However nowadays, many banks also offer Investment Banking and Private Banking services. Listed below are a number of services provided by the different areas of banking. (The list is not exhaustive) Investment Banking Inv estment Banking services are mainly provided to Large Public and Private Companies, Pension Funds, Governments, other Banks and Private Equity etc. Services Provided: Mergers and Acquisition Advisory - Advising on strategic transactions such as Acquisitions, Mergers, Joint Ventures, Leveraged Buyouts, Business Restructures Trading Platforms - That Facilitate the trading of Bonds (debt), Equities, Swaps, Options, Futures, Debt Financing - Bond issuance, Securitisation (Asset & Mortgage Backed securities), Loans, Liability Management Equities (stock)Lending - Acting as intermediary for a company that lends shares for a fee and a company that pays a fee to borrow the shares possibly for shorting. Initial Public Share Offerings - Advising and raising finance for the issue of shares to the general public Debt Underwriting - Arranging and underwriting the issuance of debt Share Underwriting - Underwriting shares during Initial public offerings (basically a guarantee to buy a portion of unsold shares) Risk Management - Providing clients with management solutions to better manage interest rate and foreign exchange risks and exposures Research - Carrying out general market, micro and macro economic research or specific sector research for clients for a fee Commodities Trading - Trading in physical commodities such as Oil, GAS, Electricity, Metals and Precious Metals such as Iron, Nickel, Gold, Silver, Palladium Private Equity - The pooling of funds to use to make acquisitions for investment purposes Market Data - The provision of real-time electronic data to companies, markets etc, to enable and assist decision making Wealth Management and Private Banking Wealth Management and Private Banking is mainly provided to private Individuals and smaller companies. Services Will include: Portfolio Management - Discretionary and Non Discretionary management of client assets Private Banking - A package of banking services for affluent individuals with levels of bespoke services for different grades of affluence. E.g. £100K to 500K, £1M to £10M, £10M to £50M etc. International Banking - A package of banking services offered to Expats etc Fund Management - The Management of pooled funds in Unit Trusts, OIEC's or through a fund supermarket owned by the bank or externally Model Portfolios - Bespoke portfolios that are designed specifically to achieve the investment goals of a group of clients Financial Advisory and Planning - Retirement Planning, Estate Planning, Executor and Estate Administration, Trustee Services, Pensions, Tax Advisory Financing - Trade, Real Estate, Boats. Yachts, Private Jets Execution Only - Retail share investing Credit Cards - Providing credit card services to clients Corporate Banking Corporate Banking is mainly provided to larger commercial enterprises where turnover exceeds between £5M - £10M. Some of these services are listed below. Business Banking - Providing business bank accounts to corporate clients International and Trade Finance - Providing international import and export financing, letters of credit Asset Financing - Providing financing solutions for acquiring cars, boats, planes, property Debt Factoring and Invoice Discounting - Proving working capital solutions by taking over a client's debtors for a fee to provide clients with smother cash flow. Inventory Finance - Providing finance to intermediary distributors of trucks, Tractors, Construction Equipment, Cars Cash Management - Finding the best return on client cash balances by moving the funds around to get the best rates Foreign Exchange - FX Trading Corporate Credit Cards - Providing corporate credit cards to firms Business Development loans - Loans to help businesses grow Retail Banking Retail Banking is mainly provided to individuals (general public) and small and medium sized businesses. Services include: Traditional Banking - The provision of bank accounts (current and savings) Cheque Clearing - The clearing and processing of cheques with other banks Mortgages - The provision of residential mortgages Personal Loans - Loans to consumers to buy cars, domestic appliances, Business Loans - Loans to businesses to fund growth and acquisitions Debit and Credit Cards - Provision of personal Debit and Credit Cards Insurances - Travel insurance, Residential Insurance Banking Income Most of the income generated by banks will either be: Fees Received Interest Received Commission Received VAT Liability of Services Supplied by Banks The VAT liability of banking income will depend on: Type of Service being provided to clients and customers The Place of Supply of those Services The Type of Client (business or non business) services are being provided to The Specific VAT rules governing the services being supplied Whether the Service is to a Branch, a VAT Group member or not The VAT liability will either be: Standard Rated (20%) Zero Rated Exempt Outside the Scope Type of Service Being Provided Financial Services are largely Exempt from VAT under the Financial Services VAT Exemption (VAT Act, Schedule 9, Group 5, 1-9). As such, many services offered by Banks will be Exempt when supplied in the UK. Services that are not covered under the Finance Exemption will be taxable at the Standard Rate (20%) when supplied in the UK by banks and other financial institutions . The Place of Supply of Services and the Type of Client The place of supply of services as mentioned under the place of supply tab, is determined largely by whether the supply is to a customer or client in business or whether the supply is to a non business customer . Business Customer Supplies to customers in business (VAT Registration is normally sufficient evidence) Supplies to customers that have both business and non-business activities such as charities, local authorities and government departments Non Business Customer A customer who is not in business Private individual Charity, Government Department or other body which has no business activities Services Supplied to Customers in Business Supplies to clients in business will be covered under the B2B (Business to Business) General Rule and thus the place of supply will be where the customer or client belongs . (Clients Country of Operation). Services Supplied to Non Busin ess Customers Normally supplies to Non business customers under the place of supply rules will be covered under the B2C (Business to Customer) General Rule and thus the place of supply will be where the supplier belongs. However there are special rules in place for particular B2C services (including Financial Services) that treat the place of supply of those services that would normally be taxable in the UK as being supplied where the customer or client belongs. List of Services Supplied by Banks and their VAT Liability As mentioned above, banks provide a broad spectrum of services and below is a list of B2B and B2C services both within and covered by the Financial Services VAT Exemption and those that are not covered. Note: The services listed below that are Exempt when provided to clients in the UK are within the scope of the Finance Exemption and the services that are Standard Rated are not. Below we have listed the main types of services offered by banks and the VAT liability for each service which depends largely on the type of client B2B or B2C and the service being offered. Retail "Day to Day Banking The Traditional service offered by banks to the retail sector (general public) of accepting cash deposits and providing advances and loans, cheque processing and clearing to customers where interest in earned by the banks as income is: Exempt when supplied to a B2B and B2C customer in the UK Outside the scope of VAT (with recovery) when provided to Non UK B2B or B2C customers. Insurance Services Many banks will offer insurance products such as home insurance, contents insurance, motor breakdown insurance to its customers. These services will be: Exempt when supplied to a B2B and B2C customer in the UK Outside the scope of VAT (with recovery) when provided to Non UK B2B or B2C customers. Corporate Finance (Mergers and Acquisitions) This service is mainly offered by Investment Banks and will involve providing Advisory Services in relation to potential acquisitions or mergers between companies. These services are: Standard Rated when provided to B2B and B2C customers in the UK Outside the scope of VAT (with recovery) when provided to B2B and B2C non UK Customers Corporate Loans (Including Mortgages) Corp orate Loans can be offered by retail banks to smaller businesses or by banks providing corporate banking services to larger businesses that turnover millions of pounds a year. The granting and advancing of credit falls within the Financial Services Exemption and is: Exempt when supplied to a B2B and B2C customer in the UK Outside the scope of VAT (with recovery) when provided to Non UK B2B or B2C customers. Execution Only Share Transactions Many banks will offer online trading platforms that facilitate execution only trading in securities such as equities whereby members of the public or companies can buy and sell shares. Execution only trading means the bank will act on the clients instruction to either buy or sell shares (with no advisory or recommendations involved) and the VAT liability is as follows: Exempt when supplied to a B2B and B2C customer in the UK Outside the scope of VAT (with recovery) when provided to Non UK B2B or B2C customers. Arranging the Issue or Placement of Securities Banks (Investment) involved in the arrangement or placement of shares, rights issues, coordination of an issue of shares where there are a number of participants, this service will be: Exempt when supplied to a B2B customer in the UK Outside the Scope of VAT (with recovery) when provided to a B2B customer Safe Custody Some banks offer safe custody services whereby clients can store documents such as share certificates, Gold, Silver, titles etc for a fee. This Fee is: Standard Rated (20%) for B2B and B2C when supplied to customers in the UK Outside the Scope of VAT (with recovery) when provided to a B2B or B2C customer Global Custody Global Custody may contain safe custody but will include a package of additional services such as the collection of dividends, interest etc. Where the service contains additional activities as described above along with safe custody, then the VAT liability will be: Exempt when supplied to a B2B and B2C customer in the UK Outside the scope of VAT (with recovery) when provided to Non UK B2B or B2C customers. Nominee Services Nominee Services whereby client shares will be held in the name of the bank on behalf of them. These services are: Exempt when supplied to a B2B and B2C customer in the UK Outside the scope of VAT (with recovery) when provided to Non UK B2B or B2C customers. Stock Lending Stock lending describes a situation where one person, the ‘lender’, transfers to a second person, the ‘borrower’, the legal title, along with all the dividends and rights, to securities. The borrower agrees to return to the lender, at a later date, an equivalent number of the same securities as those received. Stock lending is : Exempt when supplied to a B2B and B2C customer in the UK Outside the scope of VAT (with recovery) when provided to Non UK B2B or B2C customers. Share Underwriting Share underwriting where a bank will receive a commission or fee for guaranteeing to buy unsold shares during an Initial Public Offering (IPO) is : Exempt when supplied to a B2B customer in the UK Outside the scope of VAT (with recovery) when provided to Non UK B2B customers. Note: Any shares onward sold by the Bank will also follow the same VAT liability as above. Tax, Legal, Accountancy Adhoc services that may be provided by some banks or financial institutions are not covered by the Finance Exemption and are thus: Standard Rated 20% (taxable) when supplied to a B2B and B2C customer in the UK Outside the scope of VAT (with recovery) when provided to Non UK B2B or B2C customers. Portfolio Management Portfolio Management services normally offered by the Private Banking or Wealth Management arms of banks for individual clients can be split into discretionary or non discretionary. These services can be offered either internally or via third party Investment Managers. (Portfolio Management does not fall within the Financial Exemption like the management of funds such as AUT's of OEIC's as the service is not a collective investment where large numbers of clients funds are pooled together and invested) Discretionary Portfolio Management is where the Manager will make investments on behalf of the client based on their goals and risk appetite Non Discretionary Portfolio Management is where the client makes their own investment decisions and may take recommendations or advice from the manager but will ultimately decide on the investments the manager should make on their behalf. Normally the Portfolio Manager (the bank) or the external Portfolio Manager will charge an Annual Management Fee which will be: Standard Rated 20% (taxable) when supplied to a B2B and B2C customer in the UK Outside the scope of VAT (with recovery) when provided to Non UK B2B or B2C customers. The Investment manager as part of the contract may apply a transaction charge (commission) for executing trades or buying and selling securities on behalf of the client. If these charges as part of the contract are a separate supply of dealing charges, then the VAT liability is as follows: Exempt when supplied to a B2B customer in the UK Outside the scope of VAT (with recovery) when provided to Non UK B2B customers. If these charges as part of the contract are bundled together as a single fee for Investment Management, then the VAT liability is as follows: Standard Rated 20% (taxable) when supplied to a B2B and B2C customer in the UK Outside the scope of VAT (with recovery) when provided to Non UK B2B or B2C customers. Model Portfolios A Model Portfolio Service is a tailor made service designed by an Investment Manager(s) for a group of investors with the same investment aims. Funds are invested in a diverse range of assets and asset classes with the aim of reducing risk for clients. This service has traditionally been treated in the same way as normal portfolio Management by applying VAT on fees charged. However many portfolio managers are removing VAT from their fees charged to UK clients on the basis of a recent case (Tatton) where HMRC refunded a substantial amount of VAT on fees charged for their model portfolio service on the basis that the funds were pooled similar to collective investments. Futures Contracts - (Financial) Financial Futures are standardised derivatives contracts offered by and traded by Investment banks (as Futures Exchange Members) and allow investors to: Speculate on the price movement of an underlying financial instrument (Stocks, Interest Rates, Currencies, Indexes). Hedge against the movement of the price of a financial instrument. ( mainly companies that use the future contact as a hedge against to protect their own financial instruments ) Financial Futures can either be cash or non cash settled . Cash settled means there is no actual delivery of the financial instrument at expiry whereas Non Cash Settled means there is actual delivery of the instrument. Futures contracts are highly liquid and can be traded on Futures Exchanges prior to the expiration date. Income generated by banks from Futures contracts (commission earned by banks) is: Exempt from VAT when sold or traded with counterparties in the UK Outside the scope with recovery when sold to a non UK counterparty Financial Forward Contracts Financial Forwards Contracts (forwards) are similar in nature to Futures Contracts in that they both require the buyer and seller to set the quantity of a financial instrument and the date of delivery or expiry. However the major difference between the two is that whilst the Futures Contract is normally a standardised contract traded on a futures exchange , a Forward is a non standardised private agreement between a buyer and seller OTC. Note both futures and forward can be traded privately off exchange Over The Counter (OTC). Income /commissions generated by banks as broker to investors in Forward Contracts is: Exempt from VAT when sold or traded with counterparties in the UK Outside the scope with recovery when sold to a non UK purchaser Financial Options Options are Financial derivatives that are based on the value of underlying securities such as stocks, bonds, currencies and give the buyer the right to buy (call option) or sell (put option) the underlying asset on a specific date and and specific price. Unlike futures or forwards there is no obligation to actually buy the underlying asset. As such a premium is paid for the right to buy the options. Most options are equity options and are traded on exchanges and if exercised, settled via centralised clearing houses. Income generated by banks trading or facilitating the trading of options is: Exempt from VAT when sold or traded with counterparties in the UK Outside the scope with recovery when sold to a non UK counterparty Foreign Exchange Trading (FX) (Spots) Banks often act as brokers offering FX currency trading (Spots) to clients and charge commission. The Income generated will be: Exempt from VAT when sold or traded with counterparties in the UK Outside the scope with recovery when sold to a non UK counterparty Research Banks (investment) often have research departments that compile and sell investment research normally to companies to assist with their investment decisions. This research is: Standard Rated 20% (taxable) when supplied to a B2B and B2C customer in the UK Outside the scope of VAT (with recovery) when provided to Non UK B2B or B2C customers. Trading Platforms Many larger banks may offer trading platforms "dealer systems" to their clients which allows them to buy and trade securities or provides live market data such as share prices or foreign exchange rates. Systems that purely provide market data services to users are taxable as follows: Standard Rated 20% (taxable) when supplied to a B2B and B2C customer in the UK Outside the scope of VAT (with recovery) when provided to Non UK B2B or B2C customers. Systems that allow users to insert bits and offers for securities and Match the parties anonymously and finalise the deal will be be covered under the Intemediary Exemption and Exempt from VAT. If the system does not match the parties on an undisclosed anonymous basis then the service will be vatable at the standard rate 20% Hire Purchase Banks may offer their customers Hire Purchase which allows them to pay installments over a set period for goods such a motor vehicles or washing machines with the option to make a final payment for the goods at the end of the payment term. Where the goods and finance are provided by the bank, then there will be two supplies one of goods and one of credit. For the supply of goods, the customer will be charged standard rated VAT at 20% immediately for the supply of the goods and the ongoing supply of credit repayable in installments will be Exempt. Factoring & Invoice Discounting Some banks may offer Factoring and or Invoice Discounting to clients. Factoring is where a factoring company (bank) purchases the outstanding debtor balances from a client for a charge and can either be recourse or non-recourse. Recourse is where the client maintains the responsibility and bears all the risks of debtor non payment. If the debtor goes bankrupt or the bank can't collect the funds from the debtor, then the client will have to buy back the debt from the bank. Non Recourse factoring means that the factoring company bears greater risk if a debtor defaults on its debt. Another feature of factoring is that it means the bank or factor can maintain a credit control facility for the debts and collect the debts directly from the debtors. Invoice discounting is where the bank provides a loan against the clients outstanding debtor balance for which the client can draw down against. The Debtor will be unaware that the client is using this facility. There can be many charges levied by the factor (bank) some of which may be Standard Rated 20% and others Exempt. Below is a list of the possible charge types and their VAT liability. Arrangement and or Activation Fee - Standard Rated 20% VAT if provided to UK Businesses and Zero Rated if provided to Non-UK business Discount Fee or Charge for Credit - Exempt if provided to UK Businesses and Zero Rated if provided to Non-UK business Service Charge - Standard Rated 20% VAT if provided to UK Businesses and Zero Rated if provided to Non-UK business Non Utilisation of Loan Facility Fee - Exempt if provided to UK Businesses and Zero Rated if provided to Non-UK business Early Termination Fee - Standard Rated 20% VAT if provided to UK Businesses and Zero Rated if provided to Non-UK business Funds Transfer Charges - Exempt if provided to UK Businesses and Zero Rated if provided to Non-UK business Legal and other Admin Fees - Standard Rated 20% VAT if provided to UK Businesses and Zero Rated if provided to Non-UK business Private Equity / Strategic Investments Banks can also as part of their business use its own funds along with other corporate clients or individuals to invest (or build up stakes) in external businesses with the aim of holding those businesses for investment purposes. I.e. Capital growth. Income generated from those investments can be dividends which are outside the scope of VAT or in the case where the bank is actively managing those investments and charging a fee to the other participant, this will be Standard Rated. BANK COSTS AND VAT Banks by their nature are not actively trading in physical goods and as such most of their costs will be professional or resource (staffing) related. Costs - Plus VAT For Banks, VAT will typically be incurred on professional service and IT related costs such as Information Technology Software and Software Development Virus and Anti Malware Protection Hardware such as Computers, Servers, Screens, Keyboards, Mouses Telecommunications and Equipment Market Data Brokerage Consultancy Services Legal Services Electricity Administration Furniture and Fittings Security Property Rental (opted properties) Other Asset Purchases for Hire Purchase or Inventory Finance Office Supplies Exchange Membership Licence Fees Exchange Admin Fees Exchange Access Fees Gate way / Terminal Connectivity Swift Messaging Advertising Sponsorship Research Costs - No VAT Banks will have significant Non Vatable Costs due to the large numbers of staff they employ. Wages and Salaries Income Tax and National Insurance Bonuses Property Rental (non opted) Pension Contribution Clearing Systems and VAT Banks may have a variety of systems (especially the larger banks) to record Income and cost and the associated output and input VAT respectively. Most of the time the number of different systems will be dictated by the number of acquisitions the banks have made over the years where they inherit different systems from each acquisition. However many will have core well established market leading systems (Accounts Payable and Accounts Receivable) such as SAP to record and account for VAT on the bulk of their sales and purchases and which can easily be integrated into into Tax Engines to churn out VAT Returns. From a VAT perspective, the most important and critical aspect for systems in today's digitalized world is their ability to apply the correct VAT code to specific transactions and their flexibility for full end to end automation of the VAT Accounting, Reporting and Recovery process. Sales and VAT Reporting Services provided by Banks to their customers (both internal and external) will need to be treated and categorised correctly for VAT to ensure: The correct amount of Output VAT is included on their VAT Returns and paid to HMRC The correct amount of VAT is included on sales invoices Their Partial Exemption VAT Recovery Rates and Actual VAT Recovery is accurate The best way to ensure the accuracy of above is to: Have a highly automated billing system with links to the static data system that stores clients name, type and location / country of operation details Have a digitalised VAT process that auto allocates income to the correct Partial Exemption sectors Have well trained front office billing staff who understand VAT and the differences created by billing to UK vs Non UK customers Have robust controls around the review and authorisation of invoices Have a Team of Tax or VAT specialist to monitor, advise and carry out regular reviews of the VAT billing Process Have multiple level VAT return reviews and investigate and seek explanations for any quarter on quarter exceptional variances Costs and VAT Reporting VAT incurred by banks on costs is often very significant and as such it will be high on management's radar to ensure: VAT allocation is aligned to cost allocation VAT recovery from HMRC is optimised VAT is recovered in accordance with the Partial Exemption Method agreed with HMRC VAT Recovered is allocated back to the correct business area (Equities, Corporate Finance, Corporate banking, Private Banking etc) VAT incurred on costs can be split into: Front Office VAT - VAT that is directly incurred and attributable to specific business areas such as Corporate Banking, Mergers and Acquisitions, Fixed Income Bond Trading, Corporate Loans, Foreign Exchange Back Office or Infrastructure VAT - General VAT incurred for all business areas such as IT, Consultancy, Electricity, Security, Administration. Partial Exemption Methods and VAT Allocation Most banks will be partially exempt in that they provide taxable and exempt services to their clients and as such will have agreed methods with HMRC for allocating and recovering VAT incurred on their costs. Note: Partially exempt means that not all of the VAT incurred on costs will be recoverable from HMRC, only a portion. These agreements are known as Partial Exemption Special Methods (PESM) and will be different for each bank. They contain precise details of how VAT will be allocated to the different agreed sectors (Equities, Investment Banking, Retail Banking, Derivatives etc) and also how VAT recovery should be calculated. So the agreements will stipulate how VAT will be allocated. For example based on the: Firms internal Cost Allocation Methodology Business Area Activity Business Area Front Office Headcount Others VAT Recovery The recovery of VAT in banks will be based on specific formulas as stipulated in the Partial Exemption Special Method. Most will be in the following format: VAT Pool X Taxable Sales (Standard Rated + Reduced Rate + Zero Rated / Total Sales (Taxable + Zero Rated + Exempt) = VAT Recoverable % Note: The amounts in the above categories can be in the form of sales values , no of transactions , no of sales credits etc and will depend on what is agreed in the PESM Looking at the above formula, it can be seen that the level of VAT recovery will be dependent on the ratio of taxable sales to total sales. The more exempt sales a bank has the lower the VAT recovery The greater the taxable sales a bank has the greater the VAT recovery will be. VAT Recovery Methods Due to the complex operational nature of banks and their varied products, most will have agreed Partial Exemption Special Methods (PESM) with HMRC. These agreements prescribe in detail how input VAT will be allocated and the methods to be used in the various areas of the bank to recover VAT. Standard Method - is simply a values method as shown below but may have special rules depending on the products supplied : VAT Pool X Value of Taxable Sales / Total Value of Sales = VAT Recoverable % Partial Exemption Special Methods (PESM) - Can include Values, Transaction Counts, Sales Credits etc as agreed with HMRC for the different business areas or sectors within a bank. There are a number of typical Partial Exemp tion S pecial Methods (agreed method with HMRC for the allocation and recovery of input VAT) in use by Banks namely: Values Based Method Transaction Count Method Sales Credits Method Mixture of Above The method used will depend on the complexity of the banking business. A purely Retail or Corporate banking business will be able to use the standard values method which uses revenue values to calculate the VAT recovery rate (RR) to be applied to the pools of input VAT to determine the level of VAT the bank can recover from HMRC. The Recovery Rate Calculation is: Values Based Method (Std Rated + Reduced Rate + Zero Rated) (Std Rated+ Reduced Rate+ Zero Rate + Exempt ) = RR Note the method can be used in conjunction with the other methods Pros Data usually easy to extract from Accounting System Easy to review, audit and verify source data Uncomplicated or time consuming Cons Assumes larger Loan book areas use higher input VAT (not always the case so input VAT allocation needs to be accurately based on use) Not alwa ys suitable for more complex operations like Investment Management, Wealth Management and Investment Banking Transaction Count Method This method uses transactions instead of values by tallying up each transaction for example each receipt of a fee or commission (less any refunds) in each business area . For example equities, credit, FX, Bonds or Fixed income etc. As this method measures each business transaction, it can be more accurate in terms of calculating the correct VAT recovery rate for more complex business areas. The Recovery Rate Calculation is: No of Trans (Std Rated + Reduced Rate + Zero Rated) No of Trans (SR+ R Rate + Zero Rate + Exempt ) = RR Pros More suitable for complex banking operations Transactions are more reflective of use than values Likely to produce a more accurate VAT recovery rate than the values method Cons Extracting the data and maintaining the reports and systems that support this can be time consuming and tedious. Annual reviews of data sources and IT sign-offs will be required to ensure accuracy of the transaction count data Takes much longer to compile and review the data to be able to calculate the annual adjustment Sales Credit Method This is a more modern method which uses the internal Sales Team reward and incentive system which is based on the level of sal es each team generate. Basically noti onal sales credits (values) are allocated to each product sales team based on the level of sales generated for each product. It is a values based system albeit not actual sales values. The ke y here is tha t the notional values allocated are reflective of the level of sales in each team and credits allocated are reviewed at multiple levels to ensure the rewards to the product teams Credit, Equities, FX, FI are reflective of performance . The Recovery Rate Calculation is: Sales Credits Non UK (Zero Rated) Sales Credits (Non UK (Zero Rated) ) + Exempt (UK)) = RR Note: This method will mainly be used for calculating the partial exemption recovery calculation for exempt type services such as equities, bonds, derivatives trading etc as the sales credit data can be split into UK / Non UK notional values and thus exempt / zero rated. Using it for banking would be tricky as the sales credits allocated to the UK would be for a mixture of taxable and exempt products and a further split at this level may not be readily available or reliable enough for the PESM calculation. Pros Data collection is much easier than the traditional values and transaction count method as it's usually readily available because the data is used internally for annual reward. Don't have to source data from multiple sources compared to other methods. Potentially quicker PESM calculation Values directly linked to activity Cons Reliance on non finance area to provide data which can increase bottle neck risks . Queries have to be referred back to different teams HMRC VAT Notice 706 ( Extract on Special Methods) 6. Special methods 6.1 The definition of a ‘special method’ A sp ecial method is any calculation, other than the standard method, that enables you to calculate how much of your input tax you may recover. It must only allow you to recover the input tax on your purchases to the extent that you use these purchases to make taxable rather than exempt supplies now or in the future. Supplies that are made outside the UK that would be taxable if in the UK and certain exempt supplies to non-UK customers also gives the right to recover input tax, but there are special rules (see section 9). A special method is unique to your business, and you can develop it to deal with your particular business circumstances. However, you must not use a special method, nor change a special method that you are already using, without our written approval. With effect from 1 January 2011 you may apply for a special method (known as a ‘combined method’) which combines your business or non-business (other than private use) and partial exemption calculations. See paragraph 7.1 for more information. 6.2 Get approval for a special method You cannot change your method without our prior approval. You must continue to use your current method, whether that is the standard method or a special method, until we approve or direct the use of another method or direct termination of its use. You can get approval for a special method by using one of these options: the online service in writing to the VAT Written Enquiries team at BT VAT, HM Revenue and Customs, BX9 1WR, United Kingdom by email to: PESM@hmrc.gov.uk From 1 August 2022, you will no longer be able to send a special method request to the PESM@hmrc.gov.uk email address. Only write to the Written Enquiries team if you are unable to use the online service. You must explain clearly how your proposed method will work, you should see Appendix 2 in this guide. When you propose a special method you must include a declaration that the method is fair from its effective date of application, and for the foreseeable future so that from its effective date a fair amount of input tax is recovered. If we subsequently find your declaration to be incorrect we may serve a special method override notice (see section 8 for more information about the special method override notice) to override the method so that from its effective date input tax would be recovered according to the use of purchases in making taxable supplies. A declaration is incorrect if 2 conditions are not met, the: method does not produce a fair and reasonable attribution of input tax to taxable supplies resulting in an unfair over-recovery of input tax person signing the declaration knew or ought reasonably to have known this at the time they made the declaration If you apply to change your existing special method this is an application for a new method and you will also have to provide a declaration. The declaration can be made using the template at Appendix 1. All approvals and directions of special methods must be given in writing by HMRC. If we decide to approve your method, we will set it out in a format which includes standard terms and conditions. A covering letter will be sent to you with the method asking you to check that it accurately reflects your proposal. Unless you raise concerns within 30 days we will assume that you’re content with the approved method. If we decide not to approve your method we will write to you explaining the reasons why, and where appropriate, invite you to make further or modified proposals. If you make a further or modified proposal you will need to make a new declaration. If there are specific aspects of the method that you need to discuss, you may do so before making a firm proposal, saving the need for an additional declaration. You will usually be allowed to use the new method from the start of the tax year in which the declaration to the written application (being the approved application) is received. See section 8 about the special method override notice. 6.3 What a special method can contain A special method is unique to your business and can contain any calculations or stages that are needed to make sure it is fair and reasonable. All special methods should: reflect all your business activities provide for direct attribution of input tax to taxable supplies provide for direct attribution of input tax to exempt supplies identify residual input tax calculate the element of residual input tax that relates to taxable supplies calculate the element of residual input tax that relates to exempt supplies allow you to determine the total input tax that you can recover 6.4 Dealing with different parts of your business separately in your special method If a method calculates a separate recovery rate for each sector it is commonly referred to as a ‘sectorised’ method. Partial exemption sectors might arise naturally from the way your business organises itself, for example, if your business has discrete areas, activities, or even accounting centres, in which you use your input tax differently. This is most likely where your business is large and complex, or where your business consists of a VAT group of separate businesses. Very often, the best way to get an accurate partial exemption recovery method in the least burdensome way is to base it on your internal cost accounting system used for management reporting purposes. However, there are circumstances where this is inappropriate, for example, where costs are reported on a marginal basis. If you propose a method based on internal cost accounting, you will need to explain the kind of system being operated and what controls are in place to make sure that it’s accurate. 6.5 How to determine the recovery rate for residual input tax When you use the standard method the percentage recovery rate for residual input tax is calculated using the values of supplies made by your business. When you use a special method you can determine your percentage recovery rate using other allocations and apportionments. You can even use a different type of calculation for each sector if you have a ‘sectorised’ method. 6.6 Examples of allocations and apportionments Some examples are: output values numbers of transactions staff time or numbers inputs or input tax floor area costs allocations management accounts This list is not exhaustive and if you use any of the above you must make sure that the resulting calculation produces a result that is a true reflection of the use to which your input tax is put. The most common apportionment methods are output values and number of transactions, although some of the others can work in some circumstances. However they are more common as allocation methods between business sectors. More information can be found in PE30000 — VAT partial exemption guidance . 6.7 Rounding in special methods You must calculate the percentage recovery rate produced in your special method to 2 decimal places. 6.8 Changes in your circumstances If you operate a special method and there’s any change in your business circumstances, or if you’re a VAT group and there’s any change in the group membership that may have a significant impact on the amount of input tax you can claim, it’s important that you tell us immediately. If your method is no longer suitable for your business, you should propose an alternative method. If you fail to propose a suitable method, we may direct you to use a specified method. In some circumstances a special method override notice (see section 8) may need to be served. 6.9 HMRC imposing a method We have the power to direct a business to use a particular method or to stop using an existing special method. These powers are only used in circumstances where we are unable to identify a mutually satisfactory method, or where the VAT system is being abused. Directions are made in writing and apply from the date they’re given, or from a specified future date. If you disagree with the issue of a direction you can ask for either of the following: a review of our decision an appeal to be heard by an independent tribunal There’s more information about what you can do if you disagree with our decision in a HMRC factsheet and customer guidance which can be found at in HMRC1: HM Revenue and Customs decisions — what to do if you disagree . 6.10 Annual adjustments when using special methods You have to follow a similar procedure to the standard method to calculate the annual adjustment for a special method (see section 12). 6.11 Gaps in special methods A special method is said to have a ‘gap’ whenever it fails to specify how to deal with an amount of residual input tax. Gaps most commonly arise when business circumstances change after methods have been approved. Residual input tax falling into a ‘gap’ is to be recovered to the extent that the purchases on which the input tax is incurred are used in making taxable supplies. Where the treatment of input tax on purchases is only partly covered by the method, that is, part of the input tax falls into the ‘gap’, only that part of the input tax not covered by the method comes under these rules. This does not mean that we think that methods with ‘gaps’ are acceptable but merely sets out how to cope with gaps if they arise in future. Once a gap has arisen, we expect that you will make suitable proposals for a new method that takes account of the gap and any other known faults in your current method. VAT and Inter- Company Recharges VAT Group Members - If a bank operates within a VAT Group structure, then most of the Internal inter entity recharges between VAT Group members will be outside the scope of VAT and thus VAT will not feature on any invoicing between the entities. However problems can arise where non UK entities recharge into the UK where the Non UK entity is not within the UK VAT Group (by way of being a branch of a VAT group member) and thus significant Reverse Charges can become applicable on cost recharges to UK entities for: Staff Consultancy Intangible Assets (Goodwill) IT Costs If the Reverse charge VAT has not been budgeted for locally, then businesses can end up having significant irrecoverable VAT costs hitting their P&L where they are not able to fully recover the reverse charge VAT from HMRC. International Banks and Sourcing Banks that have global operations will tend to want to ensure that where supplies of IT and other services are purchased: Services are provided by local suppliers where possible to the entities using the services Services are billed and delivered to the entities using the services The contracts state who is purchasing the service, consuming the service, ultimately paying for the service This can avoid situations where the services are billed to the UK and incur UK Reverse Charge VAT but actual consumption and use of the services occurs in non UK locations. Although full recovery of the VAT is possible, it can often mean lots of administration to achieve. Recharging of Professional Costs to Clients As part of providing services to clients, banks will often incur legal and other professional fees which they will then recharge on to their clients. The VAT element of the cost will also often be recharged depending on whether the banks can recover the costs from HMRC. The recovery of the VAT incurred on these cost by the bank will depend on the services being supplied to the associated client and the location of the client. See below table for illustration. Vendor Location UK VAT Service Type VAT Recovery By Bank Location of the client UK UK 20% Taxable (advisory) Full VAT Recovery UK / Non UK Non UK 20% RC VAT Exempt Irrecoverable VAT UK Non UK 20% RC VAT Exempt Full VAT Recovery Non UK Where the bank can achieve full recovery of VAT as in the above examples, it can then bill the clients for the net value of the professional services invoice. Where the VAT is irrecoverable by the bank from HMRC in the above examples, it may then seek to recover this VAT from the clients by billing the client the net value of the invoice plus the VAT incurred or reverse charged ( VAT self accounted for to HMRC). Risk Management and Controls One of the main areas of focus in Banks and more specifically Finance and Tax will be around having an adequate and robust control environment to ensure the accuracy of internal and external reporting and to prevent errors. A large part of this will be to create and maintain a strong control environment from the top downwards and ensure this is embedded within the culture of the bank. In Terms of VAT , the following list of activities and controls will all help to minimise the risk of errors. Up to date VAT Coding within front office billing systems Up to date VAT coding within the accounts payable system Up to date and thorough procedure notes for VAT return preparation Multiple reviews of all manual VAT related Journals Multi-level review of all VAT Returns and Annual Adjustments Automating manual processes to eliminate human error Elimination of spreadsheet based VAT reporting (MTD VAT Compliant) Annual or bi-annual E2E Integrity Review of VAT reporting process and systems Regular multilevel reviews of VAT accounts Service Level Agreements between VAT Team and Finance / OPS Regular training of VAT staff supported by decision trees and diagrams Ensuring regular engagement with Finance to ensure VAT is considered and built into new systems Regular review of Partial Exemption Methods and Partial Exemption calculations Adequate New Product and Trade sign-off procedures Impact Assessments for all changes to systems Automated VAT Return Production including VAT allocation and input VAT recovery Error Correction Notifications to HMRC followed up with remedial actions and controls to prevent error repitition Risk reporting process that highlights impact of errors on P&L and the required action to remediate Maintaining good relationships and ensuring transparency with HMRC Key Current VAT Related Issues In Banking Electronic Invoicing Making Tax Digital (MTD) HMRC Review - Establishment and Branches ( Fixed Establishment or Brass Plate) European Commission - Review of Financial Services & insurance Model Portfolios - wealth and Investment Managers Skandia and Danskie Bank (reverse skandia) CJEU rulings Sub - Participation vs Syndication The VAT Act 1994 - Schedule 9, Group 5 (Finance VAT Exemptions) Item number 1. The issue, transfer or receipt of, or any dealing with, money, any security for money or any note or order for the payment of money. 2. The making of any advance or the granting of any credit. 2A. The management of credit by the person granting it. 3. The provision of the facility of instalment credit finance in a hire-purchase, conditional sale or credit sale agreement for which facility a separate charge is made and disclosed to the recipient of the supply of goods. 4. The provision of administrative arrangements and documentation and the transfer of title to the goods in connection with the supply described in item 3 if the total consideration thereof [sic] is specified in the agreement and does not exceed £10. 5. The provision of intermediary services in relation to any transaction comprised in item 1, 2, 3, 4 or 6 (whether or not any such transaction is finally concluded) by a person acting in an intermediary capacity. 5A. The underwriting of an issue within item 1 or any transaction within item 6. 6. The issue, transfer or receipt of, or any dealing with, any security or secondary security being - (a) shares, stocks, bonds, notes (other than promissory notes), debentures, debenture stock or shares in an oil royalty, or (b) any document relating to money, in any currency, which has been deposited with the issuer or some other person, being a document which recognises an obligation to pay a stated amount to bearer or to order, with or without interest, and being a document by the delivery of which, with or without endorsement, the right to receive that stated amount, with or without interest, is transferable, or (c) any bill, note or other obligation of the Treasury or of a Government in any part of the world, being a document by the delivery of which, with or without endorsement, title is transferable, and not being an obligation which is or has been legal tender in any part of the world, or (d) any letter of allotment or rights, any warrant conferring an option to acquire a security included in this item, any renounceable or scrip certificates, rights coupons, coupons representing dividends or interest on such a security, bond mandates or other documents conferring or containing evidence of title to or rights in respect of such a security, or (e) units or other documents conferring rights under any trust established for the purpose, or having the effect of providing, for persons having funds available for investment, facilities for the participation by them as beneficiaries under the trust, in any profits or income arising from the acquisition, holding, management or disposal of any property whatsoever. 7. [Omitted by SI 1999/594, article 4] 8. The operation of any current, deposit or savings account. 9. The management of an authorised unit trust scheme or of a trust based scheme. 10. The management of the scheme property of an open-ended investment company. Banking and VAT-Guide on How VAT Applies in Banking

VAT on Catering - Comprehensive guide on how VAT is applied to food and catering, including whether the standard rate or zero rate of VAT applies to hot vs cold Food. Introduction Most food products are zero rated but food supplied in the course of catering is normally Standard Rated. Catering - Standard Rated Food and drink served in a Restaurant Supplies of food and drink at events such as conferences, parties, weddings and similar gatherings Cooked and ready to eat meals delivered Supply of cooking at a customers home for parties, post wedding meals etc Supply of catering under a catering contract Packed Lunches supplied for trips or other events Meals that form part of a package for hotel or bed and breakfast accommodation Service charges added to bills in restaurants Supplies of food, confectionery, drinks from vending machines in a restaurant Supplies of food and drink on a train, coach, plane, ship for journeys within the UK Supplies of food and drink to staff and visitors at clinics, hospitals and other care facilities Hot takeaway food that has been heated to enable consumption such as fish and chips, Chinese takeaways, Indian takeaways, kebabs, Pizzas, pies, rolls, sausage rolls, pasties, hamburgers, hot dogs, baked potatoes with hot or cold filling, soup, tea, coffee, hot chocolate and other hot drinks. Hot takeaway food that's been heated to order such as toasted bread, sandwiches, panini, teacakes Hot takeaway food kept hot after cooking such as freshly baked croissants, pretzels, patties, pasties, hamburgers, Kebabs, hot dogs etc Catering - Zero Rated Supply of food that customers have to prepare for themselves Sandwiches and other food and drink (that is normally zero rated) taken to buildings for sale where the seller has no contract of supply with the firms. Food and drink provided on trains, planes and ships where the destination is outside the UK Cold takeaway (consumed off premises) food (not crisp, confectionery etc that is ordinarily standard rated Catering - Exempt Supply of food and drinks by an educational institution in the canteen to it students Supply of food and drinks in a school tuck shop Supply of food and drinks by a hospital, clinic, care home to its patients Catering - Outside the Scope of VAT Tips in restaurants Who Must Account to HMRC For Output VAT Charged The Owner of the catering facilities must account for VAT on sales of food and drink in its restaurants and on supplies of hot food The catering contractor operating on the owners premises as principal should account for VAT on any food and drink sold in the catering facility and also any fee invoices issued to the owner of the facility and on any subsidies provided. The owner of a catering facility where they have an agent that operates the canteen or restaurant on their behalf should account for VAT on food and drinks and any hot takeaway food sold within its facility. Under this arrangement a supplier can either invoice the principal directly for goods supplied to the agent for sale in the canteen allowing them to recover the VAT or issue the invoice to the agent who can then recharge these on to the principal with VAT and account for it on their return. Contractors who sell goods to both the catering establishment owner and also supply goods in the restaurant. In this case standard rated VAT will be payable by the agent on food and drink sold to the owner and on the fees charged by the agent for running the canteen. -Contains public sector information licensed under the Open Government Licence v3.0. Food and Catering - Guide for Food & Catering VAT