VAT update July 2026

Welcome to the July 2026 edition of RPC's VAT update, your monthly source for news and analysis from the world of VAT.

News

HMRC updates VAT Notice 723A 'Refunds of UK VAT for non-UK businesses'

HMRC has updated its guidance on how to claim a VAT refund in the UK if you are established outside the UK.

Specifically, section 2.14 has been updated to explain that if you use an agent to act on your behalf they may need to register as a tax adviser with HMRC.

View the updated VAT Notice 723A.

HMRC updates its VAT Northern Ireland and European Union (EU) manual

HMRC has added the Northern Ireland and EU manual to its list of VAT manuals for HMRC staff.

This sets out HMRC's view of the rules as they apply to supplies and acquisitions of goods between Northern Ireland and the EU.

View the updated VAT Northern Ireland and EU manual.

HMRC updates its VAT Statutory Interest manual

This guidance provides technical and procedural advice for HMRC staff who deal with VAT statutory interest claims.

The latest update includes a new link to the newest version of the statutory interest calculator.

View the updated VAT statutory Interest manual.

Case reports

Court of Appeal follows LIFE in applying the 'typical consumer' test

In St Patrick's International College & Ors Ltd v HMRC [2026] EWCA Civ 852, the Court of Appeal considered whether supplies of education made by St Patrick's International College Ltd, London College of Contemporary Arts Ltd and Interactive Manchester Ltd (the Appellants), should have been treated as exempt for VAT purposes by virtue of Article 132(1)(i) of Council Directive 2006/112/EC and/or Group 6 of Schedule 9, Value Added Tax Act 1994 (VATA 1994).

The Appellants are alternative providers of education that do not have degree awarding powers or university status.

The appeals concerned VAT assessments issued by HMRC on supplies of educational services in the period 1 December 2012 to 6 August 2017 (the Relevant Period). The Appellants considered that some or all of the supplies made by them should have been treated as exempt for the purposes of VAT. HMRC disagreed and issued various decisions and assessments for VAT relating to supplies made by the Appellants during the Relevant Period.

Both the First-tier Tribunal (FTT) and the Upper Tribunal (UT) dismissed the Appellants' appeals. Before the Court of Appeal, the Appellants' main ground of appeal was that the UT had erred in concluding that the correct question to ask (in relation to the supplier condition in Article 132(1)(i)) was whether the suppliers were sufficiently comparable, rather than sufficiently similar, in the view of the typical consumer. Key to this point was the Court of Appeal decision in Leisure, Independence, Friendship and Enablement Services v HMRC [2020] EWCA Civ 352 (LIFE), which reasoned that, when assessing similarity for the purposes of compliance with fiscal neutrality in relation to Article 132(1)(g), the national court or tribunal must adopt the point of view of the typical consumer. HMRC accepted that the decision in LIFE was inconsistent with the UT's decision but sought to argue that the Court was not bound by it.

The Court of Appeal considered that, the test applied by Lord Justice Miles (following the decision in LIFE) in Rank Group Plc v HMRC (Joined Cases C-259/10 and C-260/10) [2020] STC 23 (Rank) applied to the supplier condition in Article 132(1)(g). The Rank test meant that a distinction between two supplies does not permit a difference in treatment unless that distinction has a significant influence on the choice of the typical consumer. It was common ground that, should the Court be bound by LIFE, the same reasoning must apply to Article 132(1)(i).

The Court of Appeal ultimately held that it was bound by the decision in LIFE on the basis that this was an existing, earlier decision of the Court of Appeal that interpreted and applied the same body of EU case law that HMRC invited the court to apply. The FTT and UT thus erred in law in concluding that the Rank test did not apply to the supplier condition in Article 132(1)(i). It was common ground that if the Rank "typical consumer" test applied, the Appellants' Higher National Certificate and Higher National Diploma courses were sufficiently similar to those supplied by exempt higher education institutions that any differences would not significantly influence the choice of the typical consumer. Accordingly, HMRC's denial of the VAT exemption in relation to the Appellants' supplies breached the principle of fiscal neutrality, with the result that the Appellants were entitled to rely on Article 132(1)(i).

The appeal was therefore allowed.

View the judgment in St Patrick's International College & Ors Ltd.

Why it matters

Whilst this was an important decision for the Appellants (and no doubt other higher education providers) it was based on the requirement for the Court of Appeal to follow the LIFE decision, which is binding on it, rather than a vindication of the Appellants' substantive arguments. Given the Court of Appeal's observation that there was "considerable force" in HMRC's arguments, HMRC may well seek permission to appeal to the Supreme Court.

Upper Tribunal rejects cross-border VAT grouping application

In Barclays Service Corporation and another v HMRC [2026] UKUT 211 (TCC), Barclays Services Corporation (BSC) and Barclays Execution Services Limited (BESL) sought to challenge HMRC's refusal of BESL's application for BSC to join its UK VAT group.

BSC is a US-based corporation in the Barclays global corporate group. It primarily operates in the US but has a branch in the UK and makes intra-group supplies to UK-based entities. On 1 December 2017, an application was made for BSC to join the UK VAT group.

HMRC rejected the application for the following alternative reasons:

1. BSC was not eligible to be treated as a member of the VAT group because, for the purpose of section 43A(1), VATA 1994, it was not established, nor did it have a fixed establishment, in the UK.

2. Alternatively, if BSC did have a fixed establishment in the UK, it was nevertheless necessary to refuse the application "for the protection of the revenue", within the meaning of section 43B(5)(c), VATA 1994.

The FTT dismissed the appeal accepting both of the above arguments. The appellants appealed to the UT.

The UT dismissed the appeal, and upheld the FTT's finding that BSC did not have a fixed establishment in the UK on 1 December 2017 because BSC's UK branch had no actual or comparable control over any employees or technical resources that would have been sufficient to make a meaningful contribution to the business of BSC.

That was sufficient to determine the appeal in HMRC's favour. However, the UT went on to consider HMRC's alternative ground for dismissing the application. Disagreeing with the FTT, the UT concluded that HMRC could reasonably have rejected the application on the basis that the grouping application gave rise to a risk of avoidance or abuse. Two important factors in reaching that conclusion were: (1) the anticipated annual VAT savings were considerable compared to the "skeletal" resources of the UK branch; and (2) the timing of the application was driven by the opportunity to generate an additional one-time tax benefit of £21m.

The UT also considered a further argument raised by HMRC at the FTT, that section 43, VATA 1994, should be construed in conformity with Article 11 of Council Directive 2006/112/EC on the common system of VAT. Following the decision of the Court of Justice of the European Union (CJEU) in Danske Bank A/S, Danmark, Sverige Filial v Skatteverket (Case C-812/19), Article 11 had been construed as containing a territorial limitation such that only entities (as opposed to fixed establishments) within the territory of the Member State could benefit from the single taxable person treatment.

The UT commented that it was "somewhat strange, to put it mildly, that HMRC should be taking this position" because the UK has previously set out its stall on the international stage as having a competitive VAT grouping regime partly because of its whole establishment approach. In any event, the UT held that the conforming construction contended for by HMRC was impermissible because it was clearly contrary to the underlying purpose of the legislation and its fundamental features.

View the decision in Barclays Service Corporation and another.

Why it matters

This decision goes to the heart of the VAT grouping regime. Although the appellants lost on the facts in relation to the existence of a fixed establishment, the UT's obiter comments have broader implications. Although the UT rejected HMRC's efforts to restrict VAT grouping to UK establishments which, in the words of the UT "would result in a fundamentally different regime, with significant practical repercussions", the UT's analysis highlights the difficulty a taxpayer can face in seeking to overturn a decision by HMRC to reject a VAT grouping application on the basis of "protecting the revenue".

Court of Appeal allows HMRC's appeal confirming that the Special Scheme for Travel Agents is not applicable to private hire vehicle services

In HMRC v Bolt Services UK Ltd [2026] EWCA Civ 720, the Court of Appeal considered the supplies of on-demand mini-cab services by Bolt Services UK Ltd (Bolt) and whether these fell within the Special Scheme for Travel Agents set out in Articles 306 to 310 of Council Directive 2006/112/EC of 28 November 2006 (the Scheme). The Scheme was implemented by section 53, VATA 1994 and the Value Added Tax (Tour Operators) Order 1987 (as amended).

Both the FTT and UT found in favour of Bolt, concluding that supplies of on-demand mini-cab services fell within the Scheme as the supplies were akin to those made by a travel agent or tour operator. Both the FTT and the UT reached this conclusion on the basis of CJEU case law.

HMRC appealed to the Court of Appeal. The main ground considered by the Court of Appeal was whether the UT erred in holding that a broad, high-level approach was required to decide whether supplies fell within the Scheme, and/or to the extent that the Advocate General's opinion in Customs and Excise Commissioners v Madgett & Baldwin [1998] STC 1189, provided an alternative basis for the inclusion of Bolt's supplies within the Scheme.  

The appeal was allowed. In the view of the Court of Appeal, given the FTT's finding that tour operators and travel agents do not provide on-demand rides from point A to point B, which were the same as or similar to those provided by Bolt, it followed that Bolt's supplies did not fall within the Scheme. The Court of Appeal also focused on the rationale for the Scheme as part of its reasoning in determining that the supplies did not fall within the Scheme. It considered that the Scheme targets the travel agent and tour operator sector which most frequently provides multiple services, including across borders, where the normal VAT rules would entail practical difficulties.

While the Court of Appeal acknowledged that CJEU case law had extended the scope of Article 306 to businesses that effect "identical or at least comparable" transactions to travel agents and/or tour operators, on the basis that a narrow approach might prejudice the aim of the Scheme, distort competition and jeopardise the uniform application of the directive, this did not apply in the present case. It was not considered necessary to treat Bolt's supplies as falling within the Scheme to secure the aims of the Scheme or its uniform application, nor would doing so prevent a distortion of competition.

View the judgment in Bolt Services UK Ltd.

Why it matters

This decision demonstrates the weight that the courts will place on the purpose of legislation and the nature of the parties whom it was designed to support. It also indicates to other private hire vehicle services that they will not be able to rely on the Scheme unless they are able to demonstrate that their business effects "identical or at least comparable" transactions to travel agents and/or tour operators so as to bring them within the ambit of the Scheme.