VAT update March 2026

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

News

HMRC updates its Guidance on the domestic reverse charge procedure

HMRC has added a new section 3.5.4 'Electric vehicle charging' to its Guidance which explains why the reverse charge does not apply to the supply of electricity at a charging point for electric vehicles.

HMRC's updated Guidance can be viewed here.

HMRC updates its manual: VAT Assessments and Error Correction

HMRC has updated its internal manual to provide information on how HMRC's discretion to issue an assessment under section 73, Value Added Tax Act 1994 operates in relation to input tax error cases.

HMRC's updated manual can be viewed here.

HMRC updates its manual: VAT Cost Sharing Exemption Manual

HMRC has updated its internal manual to provide an example of how VAT operates in relation to cost sharing groups where two or more organisations with exempt and/or non-business activities join together to purchase services on a cooperative basis.

HMRC's updated manual can be viewed here.

Case reports

FTT confirms that reduced-rate VAT is capable of applying to the supply of public Electric Vehicles (EVs) charging

In Charge My Street Ltd v HMRC [2026] UKFTT 318 (TC), the First-tier Tribunal (FTT) considered whether Charge My Street Ltd's (CMSL) supplies of electric vehicle charging to EVs at public charge points (CPs) were subject to tax at the standard rate or the reduced 5% rate.

The key issue to be determined by the FTT was whether these supplies would be considered a supply of "domestic fuel or power" under Note 5(g), Item 1, Group 1, Schedule 7A, Value Added Tax Act 1994 (Note 5(g)), which indicated that supplies can be considered for "domestic use" where the relevant supply is "of electricity to a person at any premises where the electricity (together with any other electricity provided to him at the premises by the same supplier) was not provided at a rate exceeding 1000 kilowatt hours a month".

HMRC disputed the application of Note 5(g) on the basis that CMSL did not always provide the supply "to a person", often supplying through third-party intermediaries. In addition to upfront payment, customers could initiate a charging session using CMSL's partnered app (Fuuse) or through external apps operated by third parties.

The FTT held that supplies of EV charging made by CMSL to drivers as the relevant "person" were capable of falling within Note 5(g). Provision of supply through the Fuuse app did not alter this arrangement as Fuuse merely provided software and a payment processing system. The commercial and economic reality was that CMSL remained the supplier, notwithstanding a contractual term to the contrary. In contrast, operators of third-party apps acted as principals and/or commission agents and thus were considered suppliers to the consumer, rather than CMSL.

The FTT allowed the appeal in part, concluding that insufficient information was available to determine whether some or all of CMSL's supplies fell within the 1,000 kWh threshold.  

The decision can be viewed here.

Why it matters

This decision confirms that a reduced 5% "domestic fuel or power" rate can, in principle, apply to electricity supplied at public charge points if the requirements set out in Note 5(g) are satisfied.

The decision emphasises that the FTT will consider what is the true commercial and economic reality of the relationship between the parties and contractual wording will not be sufficient to re-characterise the true commercial relationship. The case highlights the importance of robust evidential data when resisting HMRC's position.

UT upholds FTT's decision that VAT is chargeable on the full price of prepaid mobile plan bundles at the time of sale

In Lycamobile UK Ltd v HMRC [2026] UKUT 74 (TCC), the Upper Tribunal (UT) considered whether VAT on Lycamobile UK Limited’s (Lycamobile) prepaid mobile 'plan bundles' became chargeable when the bundles were sold, or only when customers used the call, text or data allowances included within them.

HMRC issued an assessment to Lycamobile for more than £50 million in VAT, on the basis that VAT was due when the bundles were purchased. Lycamobile argued that the bundles merely provided rights to future telecommunications services, and therefore VAT should arise only when the allowances were actually used. It also contended that the bundles should be treated as multi-purpose vouchers, and VAT would only become due on redemption.

The key issue for determination was the nature of the supply and whether Lycamobile supplied telecommunications services when the bundle was sold, or only when the allowances were later used.

The UT upheld the FTT’s conclusion that the relevant supply arose when the bundle was sold. In the UT's view, customers were contracting for allowances which conferred the right to access telecommunications services for a fixed period and price, and that there was a direct link between the consideration paid and those allowances once the bundle was acquired. The fact that customers often used only a small proportion of their allowances did not affect the VAT analysis. The UT also rejected Lycamobile's argument that the bundles constituted multi-purpose vouchers.

Accordingly, the UT dismissed Lycamobile’s appeal and confirmed that VAT was chargeable on the full price of the bundle at the time of sale, regardless of whether the allowances are subsequently used.

The decision can be viewed here.

Why it matters

This decision confirms that where customers pay for guaranteed access or availability of services, the taxable supply may occur when that access is granted rather than when the service is actually used. The case provides important clarification for telecom and subscription-based business models where customers purchase bundled service entitlements that may not be fully utilised.

FTT finds that the supplies were supplies of staff and not VAT exempt services

In Genuine Care Homecare Services Ltd v HMRC [2026] UKFTT 235 (TC), the FTT considered whether Genuine Care Homecare Services Ltd (GCHS) was liable to account for VAT under the reverse charge mechanism on supplies received from Atena, a Slovak company, and whether HMRC’s assessments and failure-to-notify penalty were valid.

GCHS operated a domiciliary care business in the UK and engaged carers through Atena. HMRC argued that Atena was supplying staff to GCHS, and therefore GCHS should have accounted for VAT under the reverse charge rules. GCHS contended that Atena contracted directly with service users or that GCHS acted as an undisclosed agent, such that exempt welfare services were supplied.

The FTT rejected these arguments. It found that there was no contract between Atena and the service users, and that Atena’s supplies were supplies of staff to GCHS. As a result, GCHS was required to account for VAT under the reverse charge rules.

The FTT also held that HMRC’s assessments were issued within the applicable time limits and that GCHS did not have a reasonable excuse for failing to notify its VAT liability. GCHS's appeal was therefore dismissed.

The decision can be viewed here.

Why it matters

This decision highlights the importance of the contractual and economic reality in determining whether a supply is one of staff or services, and confirms that cross-border staff supplies may trigger the reverse charge, even where the underlying services are welfare services.