Keeping on top of VAT changes remains an important part of advising clients effectively, particularly as HMRC continues to refine its approach to compliance, reporting, and enforcement. Even relatively small VAT updates can have practical implications for clients’ and advisers should be aware so they can offer their clients guidance, reassurance, or proactive action to stay compliant.

News as recently as last week when HMRC has issued a consultation on making direct debit payments mandatory for VAT return payments, with the consultation running until mid-August. Whilst nothing is final yet, the timing would suggest an announcement could be coming in the Autumn as part of the Budget, possibly with an implementation date of next April. HMRC expects this to impact the majority of VAT registered businesses. Read on for further VAT updates.

Be aware that HMRC appears to have started issuing letters to taxpayers where self-assessment or corporation tax return are submitted showing turnover in excess of £90k and where there is no connected VAT registration in place, stating that the taxpayer “must register for VAT”.

The letters go on to provide further detail, concluding that the taxpayer has two options being “register now and pay what you owe” or “ignore this letter and face an additional penalty of up to 100% of what you already owe”.

Unfortunately, the letter doesn’t state that you can contact HMRC to explain that supplies are exempt from VAT or outside the scope of VAT (for example to overseas customers) and no VAT registration is required.

The Courts have recently issued a decision in a case with some interesting, and important, comments in the discussion regarding the extent to which HMRC’s guidance can and should be relied upon.

Whilst the detail of the case is not necessarily relevant, included within the Judge’s comments are the following excerpts:

"As regards HMRC's arguments, we considered it disappointing that the main points that HMRC ran before us were the VAT Notice 701/14 Argument and the Notice 700 paragraph 8.2 Argument, both of which treated the HMRC guidance relied upon as though it was law, when it is not law and does not accurately reflect the law. We reject both arguments."

"But this paragraph of HMRC guidance is not law, and this is not a proper basis for the distinction in treatment."

We often come across HMRC treating its own internal guidance as a definitive source and, whilst it can be useful to reference HMRC’s guidance in discussions and advice, the above reiterates that this should only be done with reference to the underlying legislative position or when giving the client an indication of HMRC’s likely approach for risk management and decision-making purposes.

There has been quite a lot of coverage about this in the press and across the sector, so we’ve pulled out some important headlines and practical tips below to assist you when dealing with client questions

• 5% reduced rate VAT will apply to eligible services in three main categories as follows:
• Children’s and family tickets only for cinemas, theatres, exhibitions, concerts and shows
• Admission tickets (inc. adults) to various attractions but excluding sports facilities such as swimming pools, leisure centres.
• Eat in Children’s meals (from a dedicated menu)
• Relief period runs between 5th June and 1st September.
• Option to reduce rate or refund VAT saving for advanced admission tickets for the relief period.
• No obligation to pass on the saving (“The government expects them to” is not law).
• Tickets allowing repeat entry will only qualify if the same price as a single-entry ticket unless only valid for the relief period.

We’ve seen a number of scam letters from HMRC doing the rounds.

One in particular claims to provide a VAT portal to speed up repayments for ”priority industries” via a website www.hmrc.industries with the message “your business has been identified as requiring this step. If you do not provide notification before the due date of your next return, any claims on VAT made will be held for review.” These are scams and are not legitimate HMRC communications.

We’ve seen others with references to HMRC internal guidance to add credibility. Some of these letters are fairly convincing and are responding to frustrations businesses are experiencing dealing with HMRC, such as in the case of the one purporting to speed up repayments, so it’s easy to see how clients can be fooled.

Take the opportunity to communicate to clients that there are a number of these in circulation and the potential risks of taking action on them without checking. Advise them to avoid clicking on any links or providing login details to any platform other than their normal government gateway.