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VAT Update October 2021

Updated: Dec 15, 2021

Welcome to our latest VAT update, covering some of the latest changes in VAT and updated notices from HMRC. Please call our technical team on 01858 565142, if you'd like to discuss how the below changes might affect your organisation.

Important VAT Case. Upper Tribunal rules that legitimate expectation can be argued by taxpayers

In a recent landmark case (KSM Henryk Zeman) the Upper Tribunal (UT) ruled that the taxpayer was allowed to raise a legitimate expectation argument.

As it turned out the taxpayer’s appeal was dismissed but the UT’s decision regarding whether a legitimate expectation argument can be made in the Tribunal is certainly a game changer.

Previously there had been several decisions of both the First Tier Tribunal (FTT) and the UT which found that they did not have jurisdiction to rule on legitimate expectation and stated that this could only be argued in the High Court in judicial review proceedings. For most taxpayers, judicial review is not a viable option given the substantial costs involved. Further, unlike in the FTT, taxpayers have the additional hurdle of having to seek permission to bring their judicial review claim which is by no means guaranteed.

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Reduced rate due to move from 5% to 12.5% on catering supplies and holiday accommodation on 1st October 2021

The Government has extended the temporary 5% reduced rate of VAT on catering supplies to hospitality, hotel and holiday accommodation until 30th September, with a new reduced rate of 12.5% introduced on 1st October 2021, which will finish on 31st March 2022. Ensure you're ready for this change, contact our VAT consultants should you require assistance.

Have you applied for a Partial Exemption Special Method?

HMRC has recently updated their guidance for applying for a Partial Exemption Special Method (PESM).

The rules around a PESM can be complex. VATangles is experienced in consulting on such matters and can support you with your PESM application.

You should consider a PESM if your business makes both taxable and exempt supplies. A PESM is especially relevant to organisations in the not-for-profit sector.

You can now apply for a PESM online. To apply, you will need the following:

  • a proposal document

  • a worked example of your proposal

  • your latest annual adjustment calculation

  • your declaration

  • any additional documents

You can find further information about making a PESM application in Appendix 2 of VAT Notice 706.

On 6th August 2021, HMRC updated its guidance on opting for tax on land and buildings.

Once you have opted to tax land and/or buildings, any supply you make in relation to that option will normally be standard-rated and you will usually be able to recover any VAT you incur in making those supplies. The updated guidance states that if HMRC is satisfied, an acknowledgement of the option to tax, and its effective date, will be issued, this replaces the sending of interim letters.

There were two other recent changes to this Notice, which includes:

  • Options to tax can now be signed electronically, previously a temporary change that has been made permanent

  • The end of the temporary change to the time limit for notifying an option to tax

To read HMRC’s Notice updates, visit:

To discuss the updates, contact our team of VAT experts, who are available to answer your questions and support you with implementing any changes following updates in VAT legislation and case Law.

Call us: 01858 565142

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