Key VAT updates for September 2026

Our monthly VAT Update returns after a summer break with several important developments. This month, we consider the VAT position of alternative providers in the education sector, HMRC’s campaign concerning the VAT treatment of prize draws, confirmation that electric vehicle charging points can qualify as building materials, and further details on the UK Carbon Adjustment Mechanism (CBAM) ahead of its implementation in January 2027.

A note from Nick Hart, VAT Partner

As our VAT Update returns from a brief summer hiatus, we look forward to once again sharing important news on VAT and other indirect taxes. We have all hopefully enjoyed a summer of reduced prices for family attractions and children’s meals out as a result of the temporary reduced rate of VAT. Now that the children are back at school and the VAT rate for these supplies has reverted back to the standard rate, attention turns to other developments and the Budget in October.

Alternative providers of education services, businesses operating prize draws, and importers of iron, steel, hydrogen and other products all have developments to consider this month.

Developments in the VAT position of alternative providers in the education sector

In St Patrick’s International College Ltd & Ors v HMRC, the Court of Appeal considered whether certain private higher education providers were entitled to rely on the VAT exemption for educational services. The appellants were alternative providers of higher education and did not qualify as higher education institutions or further education colleges for VAT exemption purposes.

The appellants argued that denying them exemption breached the principle of fiscal neutrality because they supplied courses similar to those offered by recognised exempt providers. HMRC argued that the comparison should focus on the providers’ legal and regulatory status rather than the perspective of students receiving the education.

The Court of Appeal allowed the appeal. It held that it was bound by its 2020 decision in Leisure, Independence, Friendship and Enablement Services Ltd v HMRC (‘LIFE’), which established that fiscal neutrality must be assessed from the perspective of the typical consumer. The Court concluded that the tribunals below had applied the wrong legal test.

Since the judgement, HMRC has been granted permission to appeal the decision to the Supreme Court and has published Revenue and Customs Brief 9 (2026): VAT liability of supplies of education by alternative providers of higher and further education.

The Brief confirms that HMRC continues to regard the education exemption in Group 6, Schedule 9 VATA 1994 as applying only to supplies made by eligible bodies. However, HMRC acknowledges that some alternative providers may wish to protect their position pending the Supreme Court appeal and confirms that providers in a similar position to St Patrick’s may submit claims for overpaid VAT. Claims will be reviewed case by case and may be affected by issues such as unjust enrichment, partial exemption and VAT accounting elsewhere in the supply chain.

Comments

These are important developments for the education sector. Alternative providers are encouraged to review their position and consider whether to lodge a claim for over-declared VAT to protect their position. Our team can assist with reviewing eligibility and the practical next steps.

Electric vehicle charging points recognised as buildings materials for VAT purposes

HMRC has updated VAT Notice 708: Buildings and construction to add electric vehicle charging points to the list of items that qualify for zero rating when supplied as part of the construction of a qualifying dwelling.

The change has been made to section 13.8.1 of the Notice, which gives examples of articles that can be incorporated into a dwelling and qualify for zero rating. It may be relevant to residential developers and contractors involved in new-build housing. It’s also relevant to the 5% VAT relief which applies to residential conversions and renovations or alterations to empty dwellings.

Comments

It’s encouraging to see HMRC confirm a position which reflects the modern practice of installing EV charging points at home. The update provides welcome clarity that charging points can be treated as building materials for VAT purposes and can therefore qualify for relief when installed as part of an eligible construction project.

HMRC issues One to Many letters on the VAT treatment of prize draws

We understand that HMRC is issuing ‘One to Many’ campaign letters to businesses that run prize draws with both paid and free entry routes. The letters state that prize draws are not exempt from VAT and that paid entries are subject to VAT at the standard rate.

Businesses are being asked to review their position, ensure VAT has been accounted for correctly and, where errors are identified, correct the affected VAT returns and pay any VAT due. HMRC also warns that, if errors are later identified during a compliance check, a disclosure made after receipt of the letter may be treated as prompted, which could affect any penalty charged.

Comments

Businesses that have received a letter, or that operate prize draws, are encouraged to review their VAT treatment promptly. Please get in touch if you’d like to discuss your position and the options available in light of HMRC’s reported campaign.

CBAM: HMRC publishes list of qualifying carbon pricing schemes

HMRC has published a list of overseas carbon pricing schemes that currently qualify for carbon price relief under the UK Carbon Border Adjustment Mechanism (CBAM). The list is intended to help importers assess whether carbon prices paid overseas may be taken into account when calculating CBAM due and to help prevent double taxation.

The published list includes the EU Emissions Trading System, the Singapore Carbon Tax and the New Zealand Emissions Trading Scheme. HMRC notes that the list is not exhaustive and will be updated as further schemes are assessed. Importers remain responsible for determining whether relief is available, claiming any relief and meeting the associated record-keeping requirements.

We have also published an updated guide on the Carbon Border Adjustment Mechanism (CBAM), explaining the UK regime that will affect businesses importing certain carbon-intensive products from 1 January 2027. It considers which businesses may be affected, the goods within scope and the practical steps to take ahead of implementation.

Comments

It’s important that businesses start preparing now and not get caught out next year. Our VAT team is already advising a number of clients on their CBAM position and can help businesses understand the regime and prepare for the associated processes.

Reader Q&A

“We import some goods that may be within the scope of CBAM. What should we be doing now ahead of 1 January 2027?”

Nick Hart, VAT Partner:

“Businesses should first confirm whether their imported goods fall within CBAM and assess whether any overseas carbon price relief may be available. They should also ensure they can retain the necessary evidence and records ahead of implementation on 1 January 2027 which may involve liaising closely with suppliers to obtain critical information from them.”

Submit your question for October’s VAT Update

If you have a VAT question you would like our team to consider in the next edition, please send it to us using the submission form or get in touch.

How Saffery can help

Thank you for reading this month’s update. We share these insights each month to help you stay ahead of developments that could shape your compliance, planning and day-to-day business operations.

If you’d like support with any aspect of your VAT position, or would like Nick and the team to answer your question in the next edition, please use the submission form or get in touch to arrange a conversation.