Key VAT updates for April 2026
This month’s update covers important court decisions across the education, pharmaceuticals and food sectors, alongside welcome changes affecting charitable donations and VAT administration.
A note from Nick Hart, VAT Partner
April brings a mix of practical updates and notable VAT court decisions, with implications across a range of sectors. Most welcome is the introduction of new measures allowing businesses to donate goods to charities without a VAT liability – a change intended to remove barriers to donation and reduce waste.
Alongside this, we’ve seen interesting court case outcomes, including a significant Court of Appeal judgment on whether further education funding constitutes consideration for VAT purposes, and an important Upper-tier Tribunal decision involving pharmaceutical pricing arrangements.
We also touch on an interesting “Is it food?” ruling this month, as well as further steps by HMRC to digitise aspects of VAT compliance.
As always, we set out what these developments may mean in practice and where businesses should be paying attention.
News from the courts
Further education funding was consideration for a supply
Case: HMRC v Colchester Institute Corporation [2026] EWCA Civ 363
Summary
In this case, the Court of Appeal dismissed HMRC’s appeal and confirmed that government funding paid to a further education college can amount to consideration for supplies of education and vocational training provided free of charge to eligible students.
The court found a clear connection between the funding and the education delivered. In particular, the funding was paid under detailed agreements requiring the college to deliver approved courses to eligible students, with amounts calculated by reference to student numbers and course characteristics, and subject to adjustment or clawback if delivery fell short. The fact that the funding was calculated using formulae, paid in advance, and did not match a price for each individual student or course, did not prevent it being consideration for VAT purposes.
Key takeaway
As with any determination of whether a payment received is consideration for VAT purposes, the decision in this case came down to there being a sufficient direct link between funding received and education services, in this case, being delivered. The circumstances are fact-specific but are likely to apply across the further education sector. If colleges are no longer able to treat the provision of education as a non-business activity, this may inadvertently impact their access to certain VAT reliefs, which would not be welcomed.
Further education colleges should review their positions in light of this decision, as we wait for HMRC to comment further.
Upper Tribunal considers VAT treatment of NHS medicines pricing payments
Case: HMRC v Boehringer Ingelheim Ltd [2026] UKUT 00135 (TCC)
Summary
The Upper Tribunal allowed HMRC’s appeal, holding that payments made by pharmaceutical manufacturers to the Department of Health and Social Care (DHSC) under NHS voluntary pricing schemes did not generally reduce VAT due on supplies of medicines. The tribunal found that the payments were too far removed from the actual supplies of medicines to NHS bodies, pharmacies or patients to count as retrospective price reductions for VAT purposes. DHSC was not part of the supply chain and was providing general NHS funding, not paying for specific medicines. As a result, the payments did not reduce the consideration received for most supplies. An exception was recognised only where medicines were supplied directly to and paid for by DHSC, in which case a VAT adjustment could potentially be made.
Key takeaway
The decision in Boehringer Ingelheim Ltd is an important, albeit disappointing, one for affected pharmaceutical companies. As ever the devil is in the detail when considering whether payments by suppliers can be treated as reductions to consideration received for the supplies they make, thereby justifying a VAT adjustment being made. The specific facts regarding commercial and contractual arrangements must be considered, and in this case the link between the payments and the supply was “too remote to have a direct link to any particular supply of Medicines or to the supply of Medicines generally into final consumption.”
HMRC updates
Digitising VAT deregistration option to tax questionnaire
HMRC has published new guidance on declaring the status of land/property with respect to which an option to tax election has been made, as part of the VAT deregistration process. Where a business has opted to tax land or property, details must now be provided online when cancelling a VAT registration. While this information has always been required, as VAT can arise on deregistration in respect of opted land or property still held, HMRC previously obtained this information via a paper questionnaire issued after a deregistration application where it had record of an option to tax election notified under that VAT number. The new guidance indicates that this information is now to be provided online as part of the deregistration process, where the taxpayer is aware they hold, or have held and since disposed of, sold or transferred, opted property. Cancelling your VAT registration (VAT Notice 700/11) has been updated accordingly (at section 2.7). This is another step in HMRC’s drive to have routine interactions completed online.
Prior to deregistering from VAT, advice from our VAT team is always recommended as land and property assets still on-hand, and which have been opted to tax, can create significant VAT cost issues.
Changes to VAT position of donated goods
As previously announced in the last year’s Budget, from 1 April 2026 businesses are able to donate goods to charities without VAT liabilities arising.
Under the previous rules, a VAT charge would typically apply to the donating business under the business gift rules. The revised position removes this liability, provided certain conditions are met; a measure aimed at removing barriers to the donation of goods. HMRC has now confirmed the detail of the measure in VAT Notice 701/1 (sections 5.5.5-5.5.11). This guidance sets out the conditions that must be satisfied, including restrictions on value and the definitions of qualifying goods and qualifying charities.
This is a welcome measure and will encourage business to donate surplus, over-produced or unsold stock, and will be of particular interest to manufacturers, wholesalers and retailers, and of course the charities hoping to benefit. The change also aligns with wider ESG and sustainability objectives by helping reducing waste.
That said, the rules include specific conditions and value limitations. Business should carefully review the guidance and maintain sufficient audit trails to demonstrate compliance.
If you’re looking for additional insights on VAT matters, we’ve recently published:
- How to prepare for an HMRC inspection.
- Mastering VAT recovery.
- Exports: legal, operational and tax insights.
“Is it food?”
Finally, this month’s addition to the collection of interesting food-related cases is the First-tier Tax Tribunal decision in Innovation Bites Ltd [2026] UKFTT 500 (TC).
This one had been referred back to the FTT to consider whether the Mega Marshmallow product would normally be eaten with the fingers. It concluded that it would not, and therefore, did not qualify as confectionary, meaning the zero-rate of VAT applied.
If you enjoy the quirks and complexities of food classification for VAT purposes, you can revisit two of our recent highlights:
A look at how temperature, intention and customer expectation determine whether hot food escapes the standard rate.
A deep dive into product composition, essential character and why the proportion of chocolate can make or break a VAT liability.
Reader Q&A
“Why is it necessary to provide additional information to HMRC, with respect to opted property, as part of deregistering for VAT?”
Nick Hart, VAT Partner:
There is a certain rule which, subject to conditions, creates a VAT liability for a party which is deregistering from VAT for whatever reason. This relates to assets on hand at deregistration which include land and property assets. If the party deregistering had opted to tax any of those land and property assets, standard rate VAT would be payable based on market value. Where HMRC hold a record of the deregistering party having election to opt to tax, they want to know what has happened to that asset. If it is still on hand, a significant VAT liability may arise. Previously HMRC would have issued a paper form for completion but that is now being replaced by an online form.
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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 want Nick and the team to answer your question in the next edition, simply use the submission form or get in touch to arrange a short advisory conversation.
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