VAT Update – July 2025

We originally reported on the First Tier Tribunal (FTT) case in JP Morgan Chase Bank NA v HMRC [2023] TC8957in our November 2023 VAT Update. The Upper Tax Tribunal (UT) has recently upheld the FTT’s decision and rejected an appeal from JP Morgan, the conclusion being that intra-VAT group services supplied is a single taxable supply for VAT purposes.

The main issue at point concerns intra-VAT group services supplied by JP Morgan Chase Bank NA to JP Morgan Securities Plc and whether they constituted a single composite supply or separate supplies of distinct services, and whether any element of those services qualified for VAT exemption under the financial services VAT exemptions. The services in question were performed under a global master services agreement and included back-office services, operational delivery services, and trading infrastructure services.

Also relevant in this case are specific provisions within VAT grouping legislation (sections 43(2A)-(2B) VAT Act 1994) which mean intra-VAT group supplies which would otherwise be disregarded under normal VAT grouping rules, are still subject to VAT under a reverse charge, when there is a resupply by an overseas establishment of a member of the VAT group, of bought-in services from outside the VAT group, which was the case here.

In concluding that there was a single supply which was within the scope of Section 43(2A)-(2B) the UT also dismissed the appellant’s argument that VAT exemption could be applied. VAT was therefore due on the single composite supply made within the VAT group, which was significant given the low VAT recovery rate within the VAT group under partial exemption rules.

Comments

This is an interesting case given a number of technical points in play, including single/multiple supply, contractual arrangements vs operational reality, intra-VAT group services becoming subject to VAT, and financial services VAT exemptions.

Ultimately the appellant was not able to convince the court that the operational delivery/ trading infrastructure services (some of which would qualify for VAT exemption, in their view) were supplied separately to the back-office support services. The conclusion rested on the close connections between the various services in practice, which meant that to separate them would have been artificial. On the VAT exemption point, the UT followed the decision in Target Group Ltd which confirmed the VAT exemption would only be available where financial services provided, brought about changes to the legal or financial position, which was not the case here.

This case highlights, amongst other things, the need for intra-group contractual arrangements to reflect the commercial and operational reality of what is occurring in practice. It also serves as a timely reminder that for partially exempt VAT groups in particular, reviewing intra-group supply arrangements on a regular basis, is necessary to ensure there is no element of intra-group services which may fall outside of the VAT group disregard provisions, and which would trigger a VAT liability under the reverse charge mechanism.

Please get in touch with Nick Hart, VAT Partner, to discuss the implications of this case further and how it impacts your VAT group arrangements.

HMRC has released Revenue and Customs Brief 4 (2025): VAT deduction on the management of pension funds regarding recovery of VAT on pension fund management costs.

Previously, where VAT was charged on investment management or investment consultancy advisory services in relation to employer pension funds, HMRC did not consider this to be input tax for the employer and so the VAT was not recoverable. VAT was recoverable, and continues to be recoverable, by an employer on pension fund administration costs (eg audit, actuarial and legal services).

From 18 June 2025, HMRC now accepts that VAT incurred on investment costs is recoverable as input tax by the sponsoring employer. While the Brief is not explicit, investment costs typically include investment management and investment advisory/consultancy.

It’s important to note that VAT is chargeable on the management of directly held investments such as securities by Defined Benefit schemes. The management of investments in pooled funds (Defined Contribution schemes and a significant number of Defined Benefit schemes), is exempt from VAT so that the employer does not incur VAT and therefore no change to VAT accounting will be required.

Comments

Investment advisory/consultancy services are subject to VAT and going forward, this VAT should be recoverable by a sponsoring employer in line with the normal input tax recovery rules. While the Brief notes claims are limited to the usual four-year cap, given the date of the policy change it is not clear if HMRC will accept claims of input tax for VAT incurred on such costs before 18 June 2025. From a practical perspective, claims with respect to historic costs, will likely be met with resistance from HMRC if the invoices from investment managers were issued to the pension fund trustees rather than the employer business.

Whilst HMRC’s change in view may not result in significant opportunities, it does provide an opportunity to review pension scheme arrangements from a VAT perspective, as it can be a misunderstood area.

For further details of how Saffery can assist, please contact Callum Richards, VAT Director.

The first-tier tax tribunal (FTT) has considered, in Performance Leads Ltd v HMRC [2025] UKFTT 660, whether services being provided qualify as VAT exempt financial intermediary services.

The appellant, Performance Leads, appealed a decision by HMRC that the services it was supplying did not qualify for VAT exemption under the legal provisions which allow VAT exemption on financial intermediary services. HMRC’s view was that the services were one of advertising rather than intermediation. The FTT has found in favour of the appellant.

Performance Leads provides lead generation services to independent financial advisors. It did so through two websites, “Financial advisors near me” and “Pension advisers near me”. Through these websites it would obtain information from individuals who were interested in receiving financial/pensions advice. This information was then passed to the third-party advisers and introductions then made. The advisers paid Performance Leads a referral fee based on each introduction.

Having originally accounted for VAT on its services, Performance Leads subsequently took the view the services qualify for VAT exemption under financial intermediary services VAT rules. It submitted a claim for over-declared VAT which HMRC rejected. Performance Leads appealed.

The case swung on whether the appellant was bringing together persons seeking financial services and parties providing financial services which themselves are within the scope of the financial services exemption.

The service provided by Performance Leads involved a sufficient degree checking and filtering of data to make it more than a mere conduit, and the FTT concluded that it was clear it was bringing together parties as required and was not providing advertising or promotional services.

The other important point with respect to financial intermediary services, is the point regarding work preparatory to the conclusion of contracts. The FTT felt this point which had been raised by HMRC was not relevant in this case, as the underlying financial service was likely to fall within item 6 of Group 5 Schedule 9, which covers the issue, transfer or receipt of, or any dealing with, any security or secondary security. The works preparatory point only applies to intermediary services, when the underlying financial service is one covered by items 1 to 4 of Group 5. The FTT did remark that if the underlying financial service were to fall into any of these items, this would not have changed the outcome of the case, as the interpretation of the relevant provisions within Group 5 meant that the bringing together of the parties, and works preparatory to the conclusion of the contract, were not cumulative, citing other case law in the process.

Comments

A good win for the appellant and another important judgement for financial intermediaries generally. The point regarding works preparatory is a particularly interesting one and the courts are interpreting the relevant provisions in Group 5 as meaning the bringing together point and the works preparatory point, are not cumulative.

It is recommended that financial intermediaries currently charging VAT on their introduction/intermediation services, review their position, following this judgement, and consider whether a claim for over-declared VAT might be appropriate.

Please contact Nick Hart, VAT Partner, if you would like further information.

The requirement to retain sufficient evidence that goods have been exported from the UK, to support the zero rate of VAT being applied to export sales, is one which is often overlooked by businesses and not given the care and attention it warrants.

The recent Upper Tier Tax Tribunal case of H Ripley & Co Limited [2025] UKUT 00210 (TCC) has further highlighted the issue, and the stance taken by HMRC and indeed the courts, in the matter of sufficiency of evidence.

The H Ripley case actually relates to intra-EU supplies made before Brexit, but the principles of removal evidence similarly apply to exports.

To support applying the zero rate of VAT to export sales, supplies must hold satisfactory evidence of export, within three months of the supply being made. If after that time period, insufficient evidence is held, VAT is accountable at that point. If sufficient evidence becomes available after the three months, the zero rate can then be applied, and a correction made to the VAT account.

In practice satisfactory evidence would comprise a bundle of documents which HMRC describes in VAT notice 703 (for the intra-EU pre-Brexit transactions which were the concern in H Ripley, the relevant notice was VAT notice 725). In H Ripley, the appellant held a bundle of evidence but overall, it was not sufficient to convince the UT (and earlier the First Tier Tribunal which had also found the removal evidence to be inconclusive).

The courts commented that individually the documents provided (which included bank statements, an incomplete CMR document, weighbridge documents and channel crossing tickets) failed to provide satisfactory evidence of removal and the appellant’s appeal was dismissed.

Comments

Suppliers of export goods must take responsibility for the need to retain a bundle of evidence which demonstrates the supplied goods have been exported to a place outside the UK. Reliance on third parties such as customs agents or freight forwarders, is a risky strategy, and many suppliers have been caught out by assuming these third parties are retaining all of the necessary documentation, but that is often not the case. Where satisfactory evidence is not held, the zero-rate of VAT should not be applied. The risk heightens in the case of indirect exports (non-UK parties purchasing on an ‘Ex Works’ basis) as the supplier does not have direct sight or control over the export and shipping documentation. In our experience HMRC applies the requirement to hold adequate evidence within the specific time limits strictly, and will assess for VAT due with interest, and potentially penalties.

It is recommended suppliers of exported goods, have robust internal processes and undertake regular reviews, to ensure the risk of the conditions for zero-rating export supplies of goods not being met, is eliminated.

For assistance in reviewing internal processes, or the export evidence held, please contact Nick Hart, VAT Partner.

HMRC’s guidance, for accounting for import VAT has recently been updated to include clarification on the procedures required when a business appoints another party to import goods on its behalf.

This guidance applies to businesses who use, or will use in the future, freight forwarders, customs agents, brokers or express operators, to process and declare their UK imports.

HMRC has highlighted that when a customs agent (or similar) imports goods into the UK on behalf of an importer, the importer will need to inform the agent, in writing, whether they would like to use postponed import VAT accounting (PIVA) or not. HMRC have added that there must be written confirmation in place before the agent can proceed with the import declaration. The business should keep records of any written instructions provided.

PIVA is a mechanism whereby a UK VAT registered business can pay and reclaim import VAT on the same VAT return, rather than paying the import VAT at the time the goods are imported and recovering it on a later VAT return. Businesses may use Postponed Import VAT Accounting if they are importing goods for business use, they are VAT registered and have an EORI number for customs purposes.

Comments

Whilst HMRC have only just updated their guidance for businesses needing to provide written permission, for the use of PIVA, to agents importing goods on their behalf, is nothing new. It’s accepted industry standards that all agents, importing goods on behalf of other businesses, obtain written standing instructions from importers with respect to the processing of import declarations, the use of PIVA or deferment accounts, and the level of customs representation required (direct representation for importers established in the UK for custom purposes, and indirect representation for non-established importers).

Businesses who currently import goods into the UK may want to take this opportunity to review their files and discuss with their freight forwarders or customs agents to ensure appropriate standing instructions are in place. Businesses engaging the services of a customs agent for the first time should also ensure written instructions are provided to the agent, who will typically be able to provide template instructions for editing to suit the specific circumstances.

If you need any assistance with postponed import VAT accounting or any aspect of importing goods into the UK, from a VAT perspective, please contact Nick Hart, VAT Partner.