VAT Insights – July 2026

Where the originator of credit, such as a bank, decides to repackage the debt and refinance the debt, for example via a securitisation, but continues to manage the credit, are those services of managing the debt subject to VAT? The VAT Directives generally exclude management of credit and debt collection from the scope of the finance exemptions, but there is an exception for the management of debt by the person granting it. Can that exception apply where the original grantor of the credit has disposed of it but continues to manage it on behalf of the person to whom the debt has been transferred? The strict answer according to the EU General Court in A oy (Case T-184/25), is no. Whilst the language of the VAT Directives on this issue is ambiguous, the Court has held that the clear intent is to limit the exemption to the ongoing management of credit by the person who is the current creditor. However, the longer answer is “it depends”. It depends on the actual structure of the repackaging or securitisation and it depends on the jurisdiction. If only the beneficial ownership of the debt has been transferred or assigned, then the originator may strictly remain the creditor, such that the exemption can apply. Some jurisdictions may treat securitisations as “special investment funds” and allow exemption of the management via this route, rather than the management of credit by the person granting it. However, in other jurisdictions, this alternative route may not exist and the decision of the Court may well have significant implications for the structuring of securitisations and similar repackaging arrangements.

In this edition, as well as looking at the decision of the EU General Court in Case T-184/25, we also cover the following developments:

• New HMRC guidance on input VAT recovery in relation to employer-funded pension schemes
• A consultation on extending the existing rules requiring online marketplace to account for VAT to sales by UK businesses
• A decision of the Court of Appeal that normal on-demand taxi services do not fall within the scope of TOMS
• A number of VAT and indirect tax announcements as part of the Tax Update 2026

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.

VAT, securitisations and management of credit

The EU General Court has held that the management of credit by the original lender of credit does not fall within the exemption for the "management of credit by the person granting it" where that original lender has disposed of the loans to a securitisation vehicle but continues to manage the loans: Veronsaajien oikeudenvalvontayksikko v A oy (Case T-184/25). The Court held that, based on a purposive approach to the exemption, the exemption was confined to management by the current lender only. It was clear to the Court that the intention was to ensure that all the activities of the lender in relation to credit should be treated as exempt. However, that did not apply to outsourced services and there was no reason to treat ongoing credit management by an originator that has disposed of the loans in the same way as outsourced services.

The judgment may have an impact on securitisation transactions in situations where the originator of the loans sells and transfers such loans to the issuer, and following the sale and transfer of these loans continues to service them in consideration for a servicing fee to be paid by the issuer to the originator. This will need to be considered on a jurisdictional basis. Jurisdictions where the VAT exemption for credit management services is currently interpreted such that it applies to credit management services provided by the originator of the loans, such as the Netherlands and France, are expected to be affected, because typically the issuer is not entitled to recovery of VAT on costs incurred by it in view of its VAT exempt activities. In countries such as Italy, where the credit management exemption is not applied, these services were already treated as taxable prior to this judgment. In other countries, such as Luxembourg and Ireland, the exemption may apply based on the collective investment management VAT exemption.

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New guidance on employer-funded pension costs

Following on from the announcement in 2025 of changes to HMRC’s policy on recovery of input VAT incurred on employer-funded pension costs, HMRC has now published updated guidance in its VAT Manuals on this topic. The guidance on this issue has changed significantly and it will be important for employers to consider the application of the new guidance to their specific circumstances and take any necessary action to ensure that they maximise their input VAT recovery. In particular, the new guidance makes it clear that HMRC will expect the employer to be the direct contractual recipient of the supplies of administration or fund management services, with invoices issued to it in its name, in order to recover associated input VAT. If this is not the case, then HMRC will expect those costs to be incurred by the trustees of the scheme, with the trustees then making a taxable charge for managing the scheme to the employer, potentially requiring the trustee to register for VAT. This appears to have (possibly unintentionally) removed concessions which were previously made available by HMRC, for example, tripartite contracts between the supplier, employer and trustee which could be put in place to meet regulatory obligations, and invoices which could be issued to the employer c/o of the trustee.

An updated HMRC VAT Notice 701/17 is due to be published shortly, which may clarify some of these points.

It will be important for affected business to review their current arrangements for pension scheme funding to determine if they meet HMRC’s requirements and, if not, put in place measures to ensure continued input VAT recovery going forwards.

Read our full Insights article here

Extending VAT online marketplace rules

The government has published a consultation on extending the scope of the rules requiring online marketplaces (OMPs) to account for VAT on sales made by their users to combat continuing VAT evasion and avoidance in connection with the use of such platforms. The consultation notes that VAT evasion via OMPs continues in the form of overseas sellers masquerading as domestic businesses, UK businesses spreading sales across a number of OMPs to appear below the registration threshold and businesses which essentially engage in missing trader fraud. As a result, the government is considering extending the OMP’s requirement to account for VAT to UK based businesses as well as overseas businesses.

Sales made by those not in business, such as individuals selling second-hand goods, will not be in scope of the rules and will not be affected. The government is also considering how the policy could apply to sales of second-hand goods by UK businesses.

The consultation notes that combatting online VAT non-compliance will also help to support the high streets, whose businesses are frequently outcompeted by non-compliant online sellers. Indeed, to help support this object, the government is committing that “any revenue raised from these reforms will be ploughed into improvements for the business rates system for pubs, restaurants, hotels and other businesses on the high street”.

See our Insights article here

Taxi services and TOMS

The Court of Appeal held that the Tour Operators Margin Scheme (TOMS) does not apply to supplies of mobile ride-handling services: HMRC v Bolt Services UK Ltd [2026] EWCA 720. The Court held that both the FTT and UT had been wrong to hold that on-demand minicab services provided by Bolt fell within the scope of TOMS as Bolt failed the test of providing services comparable to those of a tour operator or travel agent.

The decision that a simple supply of a taxi service booked from a principal using the services of independent providers may fall within TOMS always appeared surprising when taken at face value. One does not associate travel agents with the provision of taxi services on a stand-alone basis. However, it was clear from CJEU jurisprudence that travel services essentially amount to either accommodation and/or transport and the FTT and UT accepted that there was no reason why a supply of transport on its own should not qualify. The Court of Appeal has, however, brought common sense back to the analysis by emphasising the need to have regard to the purpose of the scheme and the need for comparability between the services of travel agents and Bolt to be viewed in that light.

The decision is now largely of historical interest following changes in the law brought in from 2 January 2026 to exclude taxi services from the TOMS scheme as a result of the earlier FTT and UT decisions in this case.

Read our full Insights article here

Tax Update 2026: VAT announcements

HMRC published a package of tax and customs measures on 23 June 2026. Amongst them were a number of relevance to VAT and indirect taxes including the following annoucements:

VAT treatment of land intended for social housing: The government has published a consultation on the introduction of a new zero rate of VAT for the sale of land intended for the construction of social housing.

Digitising the option to tax process: The government will introduce new digital channels for submitting option to tax notifications and revocations, replacing existing paper-based processes before the end of 2026.

Supplementary Data for VAT Returns: The government will explore whether better use of VAT data that businesses already hold in their digital accounting systems could help HMRC work more efficiently. This work will consider how data already held within the businesses’ digital accounting systems for audit purposes could be used to support compliance and improve the effectiveness of the tax system.

Call for evidence on Customs Modernisation: The announcements cover a range of potential customs developments and include a call for evidence to capture industry views on trade digitalisation and the opportunities and challenges this poses for the future of the UK customs regime. This will explore key elements of the UK customs regime in the context of technological and regulatory change, to ensure HMRC continue to understand evolving trade practices and needs to enable the best support for international trade into and out of the UK.

See the full Tax Update 2026 announcements

Other issues we have recently covered

Consultation on the UK taxation of dividends
The government has published a consultation on the tax treatment of individuals in receipt of distributions. The consultation notes that the provisions dealing with the taxation of corporate distributions have largely been in place since 1965. These rules are extremely broad and are intended to capture any extractions of value from a company to a shareholder in respect of their shareholding, or in respect of debt instruments with equity-like characteristics. Whilst the government considers that they generally work well, equally the commercial and legal environment in which they apply has undergone significant change in the meantime. As a result, the government is carrying out a wide-ranging review of the rules, with a particular focus (though not limited to) a number of specific scenarios.

Salaried member rules: Supreme Court decision in BlueCrest
The Supreme Court has held that on a true construction of Condition B, it is only those enforceable rights and duties that arise from the LLP agreement, statute or elsewhere that may be taken into account in determining whether a member has significant influence over the affairs of the LLP: HMRC v BlueCrest Capital Management (UK) LLP [2026] UKSC 18. In taking into account the de facto influence wielded by members with capital allocations of $100m or more, the FTT and UT had made an error of law and the correct procedure was now to refer the matter back to the FTT for a decision based on the correct interpretation of the law.

The International Controlled Transactions Schedule consultation
HMRC has published a technical consultation on the final details of the introduction of a requirement for large businesses to file an international controlled transactions schedule (ICTS). The technical consultation invites views on draft regulations to implement the requirement, a draft ICTS reporting template and an HMRC Notice which specifies much of the required detail and has the force of law (so-called tertiary legislation). It is expected that the ICTS provisions will come into effect for accounting periods beginning on or after 1 January 2027 with the first reports due by 30 September 2028 using the online template provided by HMRC.

Taxpayer successfully resists TP information requests
The FTT has allowed the taxpayer's appeal against HMRC's Schedule 36 information notice requiring production of its US parent company's consolidated and entity level accounts as part of a transfer pricing enquiry: Lifeplus Europe Ltd v HMRC [2026] UKFTT 797. The FTT agreed with the taxpayer that the documents sought by the notice were neither reasonably required for the purposes of the transfer pricing enquiry nor within the taxpayer's possession or power.

Expansion and rebranding of the Profit Diversion Compliance Facility
The former Profit Diversion Compliance Facility (PDCF) has been expanded and rebranded as the Transfer Pricing & Profit Diversion Compliance Facility. This development reflects a significant broadening in scope, moving beyond its original focus on diverted profits tax (DPT) to encompass all material non-financial transfer pricing risks. This change also aligns with the introduction of the UTPP, which applies for accounting periods beginning on or after 1 January 2026 and effectively replaces DPT for new periods.

OECD TP Guidelines: Evolving guidance on intra-group services
The OECD has recently released a draft update to Chapter VII of the OECD Transfer Pricing Guidelines, proposing a range of revisions and clarifications in relation to intra-group services. Stakeholders are invited to provide comments on all aspects of the discussion draft, including the extent to which the objectives of the work, such as updating and modernising the existing provisions, have been met.

OECD consults on changes to digital platform model reporting rules
The OECD has recently launched a public consultation on amendments to the Model Reporting Rules for Digital Platforms, which is open for responses until 14 August 2026. The consultation seeks feedback on a number of proposals to deal with issues that have been brought to the attention of the OECD since the inception of the Model Rules. These issues include: the thresholds for excluding sellers engaged in low-value goods transactions; the definitions of “Platform” and “Platform Operator”; a proposed limitation of transactional reporting where a seller is itself a Reporting Platform Operator; and the introduction of a “Related Entity” concept to exclude certain intra-group platform arrangements from the scope of reporting. In addition, the OECD is looking at possible approaches to situations where intermediaries register and list on Platforms on behalf of underlying sellers.

Special Capital arrangements and miscellaneous income
The Supreme Court has dismissed the taxpayer's appeal in HMRC v HFFX LLP [2026] UKSC 17 against HMRC's decision to tax reallocations of Special Capital as miscellaneous income. The Court rejected the argument that a taxpayer must have a legal right to receive the income for it to fall within this category. Furthermore, the Court rejected the contention that contractual arrangements providing, in principle, for complete discretion in relation to the allocation of Special Capital were in practice unfettered. Taken together, the contractual arrangements in the Partnership Deed, together with the reallocation process, provided the necessary “source” for the receipt of miscellaneous income in the hands of the individual members.

UK tax treatment of US LLCs: consultation
HMRC has published a consultation document proposing reform of the UK tax treatment of UK individual members of US LLCs and other reverse hybrid entities. UK members of such entities do not, in principle, qualify for double tax relief against the UK tax chargeable on distributions of profits even where the same economic profits have already suffered taxation in the jurisdiction where the reverse hybrid entity is established. This can give rise to very high effective rates of tax on such UK members, creating a disincentive for location in the UK of what the government recognises is a pool of “talented globally mobile individuals”. The consultation raises a series of questions both on the current impact of the high effective tax rates on UK individual members of reverse hybrid entities and also on potential solutions to the problem identified. In particular, the consultation puts forward a proposed solution which would see UK individual members of such entities treated as members of a transparent entity such that they would qualify for double tax relief by reference to the foreign tax liability suffered on relevant profits.

Employment status in regulated sectors: key takeaways from PGMOL
The FTT ruling in Professional Game Match Offcials Ltd v HMRC [2026] UKFTT 654 offers practical guidance on employment status litigation for contingent-worker arrangements regulated sectors. The case illustrates that satisfying mutuality and control does not end the employment-status inquiry. Under stage three of the Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497 test, tribunals must weigh the whole regulatory and economic context. The existence of narrow, optional engagements, regulatory rather than managerial control, limited integration and weak economic dependence all point away from employment.