The VAT Bulletin December 2025

Another year has flown by! We have had an amazing year and the highlight has to be winning VAT Team of the Year at Tolley’s Tax Awards. We were all thrilled to receive this accolade and hopefully this will propel us onto bigger and better things!

Life never stands still however, and this year is a little sad, as I waved goodbye to my longest serving employee, Glenis Gibbs, who retired in October. I recruited Glenis from HMRC at my previous firm and she insisted on following me to Gerald Edelman some eight years ago. How lucky for me that she did as she helped build the team into the success we have today.

We have been fortunate to recruit a new team member, Chelsie Robison, who has fitted in from day one. It feels like she has always worked here (that’s a good thing by the way!) Chelsie brings International VAT skills, which is a really exciting area for all of us, more of which I cover later.

Here’s to a Merry Christmas and a prosperous New Year!

The Autumn Budget

Nothing much happened in the budget in VAT terms. However, there is an emerging trend of the UK gradually diverging from EU law. We had the introduction of VAT on private schools last year, which would not have been possible within the EU. In this budget a couple of changes, again probably impossible when within Europe, were announced.

The first announcement is that taxi firms such as Uber and Bolt can no longer use the Tour Operators Margin Scheme (TOMS). This is a little esoteric, but TOMS is enshrined in EU law. HMRC lost a tribunal earlier this year which allowed certain taxi companies to only account for VAT on the profit margin. The company thought they had achieved a successful outcome, but HMRC then merely changed the law!

The second announcement was regarding supplies within VAT groups where one member is established outside of the UK. A CJEU case, Skandia, ruled that supplies between group members established in different countries, but within the same VAT group, could not ignore inter-group supplies, while they could if established in the same country. This decision has now been put aside within the UK, effectively ignoring the decision which is no longer binding.

It is likely that this theme will continue, and in subsequent budgets there will be further changes to VAT that have not changed since 1973.

An update on confectionery

Excuse the pun, but this piece of news isn’t particularly sweet. The VAT legislation for food is actually a throwback to the rates in Purchase Tax, which was effectively a forerunner of VAT, prior to the UK joining the Common Market. The UK was allowed to use the zero rates and effectively transposed the rules for purchase tax to VAT. What this means is that much of the food legislation is a window into 1970s (and earlier) thinking. For example, cakes (i.e. the Jaffa Cake case) are zero rated as back then the feeling was that cakes were good for you.

Fast forward to 2025 and HMRC are re-defining what they consider confectionery to be, and in particular the phrase in the law, ‘sweetened prepared food which is normally eaten with the fingers’. HMRC are now sending out letters to businesses they think may have treated products as zero rated that actually fall within this category. This is quite an aggressive response and as the law hasn’t changed, HMRC could go back and assess for four years on affected products. If your business is impacted by this, we are happy to advise.

International services

We are now expanding into international VAT! As mentioned the world is changing, and we are changing with it. VAT has always been declared and paid where the goods or services are consumed, but in some cases, particularly end consumers, this has not always been the case. However, this is gradually changing. For certain digitally supplied services for example, when supplied to a consumer VAT must be charged in the country where the customer belongs. By the nature of how these services are supplied a person may be selling to a number of countries, and in each country local VAT will be due.

In the past this may have meant that businesses would need to register in a number of countries. Now this can be dealt with on one return, called OSS (One Stop Shop). Similarly low value goods sold into the EU can be declared on an IOSS (Import One Stop Shop) return. The team can now support on both, and also register in any EU country if needed.