VAT Insights - July 2025

The decision of the Upper Tribunal in JP Morgan Chase is important when viewed from a number of angles. From the single/multiple supply perspective, the decision supports the FTT’s conclusion that the Levob approach was appropriate in this case (ie the services essentially formed a single indivisible economic supply which it would be artificial to split). In particular, the Upper Tribunal rejected the argument that the FTT had approached the reference to a single economic purpose at too broad or high a level on the basis that the identified aim (carrying on business in a regulatorily compliant way) was a generic aim that could be applied to any business. In doing so, it possibly highlights the legal and practical difficulties of identifying specific, individual exempt outsourced supplies within the context of an all-encompassing group support services agreement (GSSA).

From the VAT exemption perspective, the decision supports HMRC’s arguments in favour of a narrow approach to exemption in relation to outsourced services related to exempt transactions in securities, applying a similar functional approach to that the CJEU has applied to the payments exemption. Whilst this part of the judgment is strictly obiter, it significantly narrows the scope of the VAT exemption for outsourced services provided in connection with transactions in securities.

In this edition as well as the Upper Tribunal decision in JP Morgan Chase, we also cover the following developments:

• The decision of the FTT in Performance Leads Ltd concerning the extent to which a website can operate as a finance intermediary
• HMRC’s recent updated guidance on the ability of an employer to recover input VAT on employer funded pension arrangements
• Statutory interpretation of “personal use” in the context of zero-rated supplies of medicines; and
• HMRC’s updated guidance on fundraising events organised by charities.

We also have updates from across our European network, including Spain.

In addition, we produce more detailed reports on the most significant tax developments so if you scroll to the bottom, there's a list of the most important issues we have covered, with links to our more detailed reports.

If you are interested in finding out more about the below or have a specific indirect tax query, please don't hesitate to get in touch.

Single supply of global support services

The Upper Tribunal decision in JP Morgan Chase v HMRC [2025] UKUT 188 will be of great interest to other businesses who may be impacted by the conclusions reached on both the scope of the transactions in securities exemption and the single/multiple supply analysis. Whilst highly fact dependent, the decision highlights the legal and practical difficulties of identifying specific, individual exempt outsourced supplies within the context of an all-encompassing group support services agreement (GSSA).

The Upper Tribunal essentially supported the FTT decision that, properly analysed, the services under the GSSA amounted to a single taxable supply of all the services needed by the group company to carry on business, rejecting the taxpayer’s argument that this approached the question from too broad or high a level. It was not possible on the facts to separate out exempt supplies within the range of services making up the securities trading infrastructure.

In any event, the Upper Tribunal also agreed with the FTT that even if it had been possible to separate out distinct supplies relating to trading in shares and securities, these would not have fallen within the VAT exemption for transactions in securities. For services to fall within Article 135(1)(f) they would themselves need to have ‘the effect of ... changing the legal and financial situation of the parties’. It was not sufficient for there to be a causal link between the services and the change of the legal or financial situation of the parties, but rather the services had to actually involve the ‘materialisation’ of the change in the legal and financial situation. It was clear from the CJEU decision in SDC (Case C-2/95) that the FTT had correctly applied the ‘narrow’ view from Target [2023] UKSC 35 to the securities exemption, stating that the securities exemption requires ‘a functional focus on the transaction itself’. This approach makes it difficult to bring outsourced services provided in connection with transactions in securities within the scope of the exemption since those services will themselves need to actually alter the legal and financial relationship between the parties to the transaction.

Read our Insights article here.

VAT exempt intermediary services

How much does a person need to do in order to qualify as an intermediary? This was essentially the issue in Performance Leads Ltd v HMRC [2025] UKFTT 660, where the taxpayer operated two websites which sought to attract those looking for financial advice and direct them to financial advisers (IFAs) in return for a fee. HMRC took the view that the taxpayer was not acting as an intermediary through the operation of these websites. They were simply not doing enough to meet the necessary threshold.

The FTT disagreed. Although the websites only carried out limited checks and filters (essentially seeking to differentiate between those people who were potential clients of an IFA and those who were not), this was sufficient. The FTT concluded that the taxpayer was doing” easily enough" to cross the line from being a mere conduit or advertiser into being an intermediary introducing persons to IFAs.

In addition, the FTT rejected HMRC’s argument that “bringing together” needed to be coupled with ("together with") the performance of work preparatory to the conclusion of contracts based on Note 5. The FTT held that Note 5 is not to be read as if the bringing together of the parties and the conclusion of the contract are cumulative conditions. The words "together with" expand the scope of the exemption to include "work preparatory to the conclusion of contracts" in distinction to market research and the other descriptions of work in the Note, which are excluded.

Read our Insights article here.

VAT guidance on employer pension costs

Historically, HMRC denied an employer input VAT recovery on costs incurred in relation to an employer pension scheme where those costs related to management of the investment activities of the fund. Following the ECJ decision in in Fiscale Eenheid PPG Holdings, HMRC updated their policy accepting that where an employer pays for and receives a supply in relation to an occupational pension, then the employer may be able to recover that input VAT. However, HMRC continued to regard asset management costs as having a dual use between the employer and pension fund, requiring an apportionment of the input VAT. In Revenue and Customs Brief 4 (2025) HMRC has now announced that, from 18 June 2025, HMRC will no longer view investment costs as being subject to dual use. Instead, all the associated input tax incurred will be seen as the employer's and deductible by the employer, subject to normal deduction rules.

Although the new policy will be applied from 18 June 2025, the Brief appears to recognise that back claims may be made for input VAT recovery, subject to the normal 4-year cap. The Brief also notes that businesses may need to propose new partial exemption special methods to align their VAT recovery with the new policy. HMRC’s more detailed guidance in the VAT Input Tax Manual is expected to be updated in autumn 2025, and until then,
questions will likely remain about the scope of the new policy. In particular, since the policy is subject to "normal deduction rules", it seems clear that any employer will still need to ensure that it can demonstrate that it is the recipient of the relevant supplies in a way which is acceptable to HMRC.

Read our full Insights article here.

Medicines for “personal use”

The decision of the FTT in Clatterbridge Pharmacy v HMRC [2025] UKFTT 661 deals with the meaning of the term “personal use” in the zero-rating provisions for supplies of prescription medicines (VATA 1994 Schedule 8 Group 12 Item 1). However, more generally, the decision contains helpful guidance on the correct interpretation of VAT legislation, including the Notes to the Schedules, as well as being an important decision on the scope of the zero-rating of dispensing services.

HMRC took the view that the medicines in this case (both intravenous and injectable cancer medication) were not dispensed for “personal use” since this essentially meant that the patient must administer the medications themselves. In this case, they were administered by separate healthcare professionals. The taxpayer argued that the term “personal use” meant no more than medicines which are prescribed for a specific person.

This was essentially a matter of statutory interpretation requiring that the FTT take into account the natural meaning of the words, properly informed by the legislative context (taking context as a secondary consideration, after the consideration of the natural meaning of the wording in the legislation). On this basis, the FTT held the “personal use” did not carry the requirement that the medicines be self-administered. In doing so, the FTT rejected HMRC’s argument that the legislation in Schedule 8, without the relevant notes, is complete in itself and that the notes cannot by themselves adapt it.

Read the FTT decision in full here.

Fundraising events

HMRC has published updated guidance in Revenue & Customs Brief 3 (2025) on the VAT treatment of supplies made by charities and other qualifying bodies in connection with fundraising events following the recent decision of the Upper Tribunal in Yorkshire Agricultural Society [2025] UKUT 0004. The Upper Tribunal held that an event with the primary purpose of promoting the charity as well as fundraising qualified for the VAT exemption in VATA 1994 Sch 9 Group 12 item 1. It also held that the requirement in Item 1(c) that the event must be promoted as being primarily for the raising of money was ultra vires.

HMRC’s policy remains that the primary purpose of the event must be fundraising and the event must be advertised as a fundraising event. The new guidance emphasises the need for “objective evidence” of the fundraising nature of a charitable event for it to fall within the exemption. Accordingly, whilst an equal purpose of promoting the charity and its purposes (in addition to fundraising) will no longer prevent availability of the exemption and it is no longer necessary for the event to be promoted primarily as a fundraising event, charities should take care when organising such events to meet HMRC’s requirements around evidencing the fundraising purpose, including promoting the fundraising aspects.

Read the guidance in full here.

Spanish branches providing fund distribution support services: effective use and enjoyment rule

Spanish administrative tax courts continue to confirm VAT assessments issued by the Spanish tax authorities on Spanish branches of global asset managers providing fund distribution support services, on the basis that the effective use and enjoyment rule is applicable in this context.

By way of background, for a number of years the Spanish tax authorities have, on the basis of the effective use and enjoyment rule, challenged the VAT recovery status of a number of Spanish branches of global asset managers engaged in distribution support services provided to group entities outside the EU. In some cases, the tax authorities have gone further and issued assessments for output VAT on such services charged to group entities outside the EU. The rationale for the assessments has been that such services were VATable services with a place of supply located for Spanish VAT purposes in the Spanish VAT territory under the aforementioned effective use and enjoyment rule. Under this rule, the services may be located in Spain for VAT purposes if they are deemed to be effectively used or enjoyed in Spain, despite the recipient being located outside the EU.

Most recently, the TEAC (the highest administrative tax court in Spain) has again upheld the position taken by the tax authorities, rejecting arguments put forward by the claimant. These included such factors as the relevant tax office disregarding in its tax assessment several key requirements for the application of this anti-abuse rule reiterated in numerous binding tax rulings issued by the General Directorate of Taxation since 2014 onwards, and offering what seems to be a misleading interpretation of the CJEU’s case law in Athesia Druck and SK Telekom.

It should be noted that for most B2B scenarios (including financial services) the effective use and enjoyment rule was removed with effect from 2022, a sign that it was being inappropriately used by the Spanish tax authorities in many scenarios. Hopefully, the current position will be corrected by the higher courts, with rulings being expected in the short term from the National Court or, afterwards, from the Supreme Court.

Spanish tax ruling on VAT implications of debt restructuring plans

In its binding tax ruling V0647-25, the Spanish General Directorate of Taxes (GDT) has clarified the VAT treatment of “debt haircuts” agreed under court approved restructuring plans. Introduced by recent changes to Spanish Insolvency Law to transpose EU Directive 2019/1023, these plans are pre-insolvency instruments designed to prevent bankruptcy by enabling negotiated solutions between debtors and creditors.

According to the GDT, when a creditor agrees a debt haircut as part of a restructuring plan approved by the court, such modification qualifies as a price adjustment under Spanish VAT Law. Consequently, the taxable base must be reduced accordingly. This mechanism differs from adjustments for bad debts or those triggered by insolvency proceedings, as the restructuring plan is not deemed equivalent to bankruptcy. Furthermore, the ruling also clarifies that if the creditor had previously reduced the taxable base by treating the amount as a bad debt, they must issue a corrective invoice increasing the taxable base within one month of reaching the restructuring agreement.

This ruling reinforces the principle that restructuring plans, even if approved by court, are not equivalent to bankruptcy. While it offers practical guidance, particularly for service providers and creditors involved in pre-insolvency situations, companies should carefully review previous VAT adjustments and the exact terms of any restructuring agreement before proceeding.

Other issues we have recently covered

UK taxation of carried interest: next steps

The government has published a response document to its consultation on the tax treatment of carried interest, which confirms further details of the government's proposal to bring carried interest within the income tax regime from April 2026. In particular, the response confirms that proposed minimum co-investment and minimum personal holding period requirements will not be included the new regime. The document also sets out new limitations which the government intends to introduce with regard to the territorial scope of the new regime.

G7 statement on application of Pillar Two to US

The G7 has confirmed that agreement has been reached concerning the operation of a side-by-side solution to the application of Pillar Two to US parented groups which will fully “exclude US parented groups from the UTPR and the IIR in respect of both their domestic and foreign profits”. As a result, it appears that the US will remove from the progress of the One Big Beautiful Bill the section 899 provision, which threatened to impose additional taxes on residents of jurisdictions which were deemed to have in place tax measures discriminating against the US and US companies.
The statement will come as a relief to international businesses generally, which had been concerned over the prospect of US retaliation against jurisdictions introducing (what the US viewed) as discriminatory tax measures, including the widely implemented Pillar Two proposal. However, it is clear that the G7 statement represents a broad understanding of the way ahead at this stage and much work will still be needed to finalise the terms of the agreement.

HMRC consultation on behavioural penalties: Simmons response

Simmons & Simmons has responded to HMRC's recent consultation on "Reform of behavioural penalties". The consultation explores options to simplify the ways in which penalties are calculated and applied and contains proposals to provide a stronger deterrent for those who deliberately avoid paying what they owe. In general, our feedback was that clients agreed that the current system of penalty reductions is complicated and it is not easy understand why a particular percentage of the tax at stake is used as the basis for the penalty. However, any confusion is not a result of the multi-step calculation required for a penalty - which is simple enough to understand - but rather because clients feel the relevant factors leave lots to the discretion of the HMRC officer assessing the penalty.

Spanish real estate taxation update

A summary of the latest tax developments during the first half of 2025 impacting real estate transactions and investments in Spain.