Indirect tax updates

Welcome to this edition of our Indirect Tax Update, bringing you the latest VAT developments from the Court of Justice of the European Union (CJEU), the UK courts and tribunals, and HMRC.

Summary 

This update deals with the developments in indirect tax during November our Budget Insights can be found here. 

Three themes run through this month's decisions: 1. informal assurances won't protect you 2. paperwork has to be right first time, and 3. holding companies need to charge for what they claim. 

• A phone call isn't a promise. The First-tier Tribunal has ruled that a verbal assurance from an HMRC officer didn't stop HMRC assessing VAT (Abbey Group). 
• Ask for the invoice first. HMRC and the tribunal will expect you to have asked suppliers for valid VAT invoices before they consider other evidence (Unatrade). 
• Holding companies. VAT on costs linked to subsidiaries you don't charge is unlikely to be recoverable (Victoria Oil & Gas). 
• Ride-hailing. The Supreme Court has refused Bolt permission to appeal, so the Tour Operators' Margin Scheme isn't available for its service. 
• EU courts. A fix made years later won't rescue a triangulation simplification, and tax authorities can't sideline a dealer's good faith under the margin scheme. 
• HMRC. CBAM (Carbon Border Adjustment Mechanism) record-keeping starts on 1 January 2027, and HMRC has finalised its cryptoasset guidance. 

News from UK courts and tribunals 

Supreme Court and Court of Appeal 

Bolt: no margin for ride-hailing 

On 29 September 2026, the Supreme Court refused Bolt Services UK Limited permission to appeal in its dispute with HMRC over the Tour Operators' Margin Scheme (TOMS). The Court of Appeal's decision therefore stands. 

TOMS lets travel businesses account for VAT only on their margin, not on the full price the customer pays. Bolt argued that its ride-hailing service fell within the scheme. It supplies that service as principal, after buying in transport from self-employed private hire drivers. 

The First-tier Tribunal agreed with Bolt and the Upper Tribunal upheld that decision. The Court of Appeal then reversed it, finding that Bolt's supplies aren't services of a kind commonly provided by tour operators or travel agents. The Supreme Court said the application didn't raise an arguable point of law of general public importance. 

What this means for you 

- Platforms that act as principal when supplying private hire transport shouldn't assume they can use TOMS. Without it, VAT is due on the full fare. 

- If you supply transport as part of a wider travel package, check how the decision applies to your facts. 

First-tier Tribunal 

Victoria Oil & Gas plc v Revenue and Customs: holding company input tax 

A holding company that charges only some of its subsidiaries for management services, can't recover VAT on costs linked to the subsidiaries it doesn't charge. The decision is [2026] UKFTT 1246 (TC), released on 26 August 2026. 

Victoria Oil & Gas plc (VOG) was the AIM-listed parent of an oil and gas group, now in administration. Only one subsidiary, Gaz du Cameroun, generated revenue, and VOG charged it for management and administration services. HMRC accepted that these supplies were outside the scope of UK VAT with a right to recover related input tax. VOG made no charges to its other subsidiaries, with no service agreements and no invoices. 

HMRC assessed £884,000 for periods from January 2019 to July 2022. It restricted recovery to 12%, based on staff time analyses attached to VOG's own invoices to Gaz du Cameroun. 

The tribunal found that: 

- HMRC made the assessments to best judgment. The officer asked for information over several months and used VOG's own figures. Evidence supplied after the assessment goes to the correct amount of tax, not to whether HMRC used best judgment. 

- Costs recharged to Gaz du Cameroun were recoverable, as were legal costs for disputes affecting it. Delaying the recharge until the dispute ended didn't break the link. 

- Costs of litigation relating to a different subsidiary weren't recoverable, because VOG showed no supply to the litigation funder. 

- Head office and corporate legal costs were general overheads, which had to be apportioned. The tribunal left HMRC's 12% in place because VOG offered no better method. 

- VOG's work for its other subsidiaries wasn't economic activity, because no one expected a charge. 

The tribunal repeated the Supreme Court's approach in Hotel La Tour. Input VAT is recoverable if it has a direct and immediately link to a taxable activity, either a specific transaction or the business as a whole. Owning shares isn't usually an economic activity. But if the shareholder provides paid management services to the subsidiary, the shareholding can be a permanent and necessary extension of that activity. 

What to do 

- Identify which subsidiaries receive management services for payment, because input tax linked to uncharged subsidiaries is unlikely to be recoverable. 

- Put charging terms in writing, because an intention to charge once a subsidiary turns a profit does not count. 

- Trace costs to specific supplies and keep an audit trail for deferred recharges, for example through the inter-company loan account. 

- Agree a defensible method for apportioning general overheads before any enquiry. 

- Respond fully to HMRC enquiries early, because the burden sits with the taxpayer. 

If you have an open enquiry or assessment involving a holding company, speak to your Grant Thornton contact. 

Abbey Group Ltd v Revenue and Customs: a phone call isn't a promise 

The tribunal has ruled that it cannot hear a "legitimate expectation" argument in a VAT assessment appeal. It also found that, in any event, incorrect verbal advice from an HMRC officer would not have created one. The decision is [2026] UKFTT 1418 (TC), dated 13 October 2026. 

Abbey, a property developer, recovered input tax on carpets offered free to buyers of its new-build homes. In 2023, HMRC disallowed the claim and assessed £323,000 for 2019 to 2023. Abbey accepts that the VAT wasn't recoverable (because of the long standing blocking order). It argued that an HMRC officer had verbally agreed the treatment in 2016, and that it could rely on that. The tribunal found as a fact that the officer gave such assurance. 

On jurisdiction, the tribunal said legitimate expectation is a public law argument, which normally belongs in the High Court by judicial review. It preferred the Upper Tribunal's 2026 decision in Queenscourt to comments in the Upper Tribunal's 2021 decision in KSM Henryk Zeman. It reached this view with "some hesitation", noting that other recent tribunals (including Treasures of Brazil and United Carpets) agreed to hear such arguments. 

On the merits, the tribunal accepted that HMRC's response was clear, although incorrect. It still found no abuse of power in HMRC departing from it, because: 

- The assurance was verbal, given in a phone call. It wasn't a formal ruling and wasn't reflected in any published policy or established practice. The tribunal gave this heavy weight. 

- Abbey didn't change its commercial arrangements in reliance on the advice. It had started the treatment before 2016. 

- Success would have permanently stopped HMRC assessing the VAT, giving Abbey an advantage other taxpayers don't have. 

What this means for you 

- The law on jurisdiction is not settled, so this is unlikely to be the last word on whether you can raise legitimate expectation in the tribunals. 

• Incorrect HMRC advice is only one factor in the balance. If your VAT position rests on a brief conversation with HMRC, ask for confirmation in writing and consider whether you need a formal ruling.

Unatrade Limited v Revenue and Customs: ask for the invoice first 

The tribunal has dismissed an appeal over input tax backed by till receipts rather than VAT invoices. The decision is [2026] UKFTT 1438 (TC) dated 19 October 2026  

Unatrade bought Rolex watches from UK high street retailers and exported them to a company in Hong Kong. As its supplies were zero-rated exports, it claimed VAT repayments, mostly made up of input tax on buying the watches. HMRC disallowed £151,000 of input tax for periods from July to November 2023. The documents (mainly till receipts) lacked purchaser details, or the correct purchaser, or the VAT rate or amount that the VAT Regulations require. 

HMRC also refused to use its discretion under Regulation 29(2) to accept the receipts, bank statements and export documents as alternative evidence. The tribunal found that decision wasn't flawed. It relied on the Court of Appeal's decision in Tower Bridge GP, which says that: 

- The discretion exists mainly so defective invoices can be corrected with the missing information. 

- A taxpayer asking for it is asking for an exception to the rule that you need a valid VAT invoice. It's for the taxpayer to show why. 

- Unatrade never asked the retailers for proper invoices. Assuming that the retailers must have accounted for the VAT isn't evidence, and being unable to force a supplier to issue an invoice is no excuse if you haven't asked. 

What this means for you: HMRC increasingly resists alternative evidence for input tax. Ask suppliers for valid VAT invoices first, and keep a record that you asked. 

Education Training Collective v Revenue and Customs: a purchaser's route to a refund 

The tribunal has struck out an appeal about whether a customer can claim overpaid VAT directly from HMRC, because it decided it has no jurisdiction. The decision is [2026] UKFTT 1381 (TC), dated 2 October 2026. 

A college was wrongly charged VAT on constructing a new building. HMRC confirmed the works were zero-rated, but the contractor went into administration without refunding the VAT. The college asked HMRC for a refund, relying on the EU principle in Reemtsma. That principle says that if recovering overpaid VAT from the supplier is impossible or excessively difficult, the purchaser must be able to claim from the tax authority. HMRC refused, saying only the supplier can make a claim and that the Reemtsma principle ended when the UK left the EU. 

The tribunal held that it was bound by the Upper Tribunal's 2014 decision in Earlsferry Thistle Golf Club. That decision said such claims belonged in the civil courts, not the tribunal. It found the college's case couldn't be distinguished and that the Supreme Court's 2017 Investment Trust Companies decision didn't change this. It didn't decide whether Earlsferry was correct, or whether a civil court claim is still possible after Brexit. 

What this means for you: HMRC's position, set out in Revenue and Customs Brief 4 (2022), is that it won't accept these claims. The college is likely to appeal to the Upper Tribunal, and both sides have instructed senior barristers, so expect a long case. If you're stuck with VAT charged in error by a supplier that can't repay you, talk to us before you assume the claim is dead. 

Avios Group (AGL) Ltd v Revenue and Customs: a preliminary ruling, not the main event 

The tribunal has refused to pause an appeal over an HMRC information notice until the main VAT dispute is decided. The decision is [2026] UKFTT 1405 (TC), dated 12 October 2026. 

The substantive case concerns the VAT treatment of transactions in the loyalty scheme Avios runs for British Airways. About £550 million of tax is at stake, and the litigation includes a judicial review as well as an appeal against VAT assessments. This decision is much narrower. HMRC issued an information notice to check the position on potential penalties. Avios said complying would mean reviewing about 900,000 items for relevance and privilege, and asked to wait for the main outcome. The tribunal agreed with HMRC that a multi-year pause risks losing information and personnel knowledge.  

The main hearing is currently scheduled to start on 16 November 2026. This ruling isn't the tribunal's decision on the VAT dispute itself, so don't let colleagues or contacts mistake it for that. 

Court of Justice of the European Union 

These rulings don't bind UK courts, but they matter if you trade with or in the EU. 

Judgements 

Margin scheme: good faith can't be left to a separate request (Case T-569/25) 

A German jewellery and watch dealer (X GmbH) applied the margin scheme when it resold watches. Its suppliers' invoices said they were applying the scheme. On audit, the German tax authority decided the watches were new, so the scheme was wrongly applied. It refused the dealer the scheme and reassessed VAT on the full sale price. 

Under German law, the dealer's good faith couldn't be considered when the tax was assessed. It could only be raised in a separate, discretionary request for relief on fairness grounds, with its own objection and court process. 

Ruling on a referral from the Bundesfinanzhof, the General Court held that Article 314 of the VAT Directive, read with the principle of effectiveness, rules this practice out. Following Litdana (C-624/15), a dealer holding an invoice that refers to the margin scheme can't be refused it unless the authorities show the dealer lacked good faith or failed to take reasonable measures to avoid fraud. A separate request for relief risked making the right excessively difficult to use, because of duplicated costs, years of delay and evidence rules that look only at the taxpayer's own evidence. The referring court must verify this. 

Triangulation: a late fix doesn't work retrospectively (Case T-773/25) 

An Austrian wholesaler, F GmbH, bought goods from Swedish and Danish suppliers using its Austrian VAT number, and the goods went directly to its customers in other Member States. This was a triangular transaction, but F's invoices for 2011 to 2014 didn't include "reverse charge" wording or refer to triangulation. After an audit, the Austrian authority refused the simplification and treated F as making taxable acquisitions in Austria, refusing input tax deduction. In 2015, F reissued the invoices with the missing wording and claimed an adjustment in its March 2015 return. 

The Court said no. The "reverse charge" wording is a substantive condition, so adding it later can't have retroactive effect. By then, the tax debt and the registration and reporting duties had already arisen. A late fix risks undermining correct taxation in the destination State, for example if the final customer has since disappeared after reclaiming input tax. The Court rejected a good-faith test as unworkable, because it would need transaction-by-transaction checks. It also said that claiming the adjustment in a current or future period doesn't avoid the retroactive effect. 

What to do: put the "reverse charge" wording and the triangulation reference on invoices at the time of supply. 

Limits of the ruling: the Court didn't define "several years", so shorter delays remain open. It didn't address other national routes for recovering VAT, and it didn't answer questions two and three. 

Opinions 

 Grotta Nuova: when is an art installation a work of art? (Case T-903/25) 

The Advocate General has given his opinion on a Danish referral about an artistic installation in the courtyard of a secondary school in Copenhagen. Through his company, Grotta Nuova, the artist Thomas Poulson created a space with pavilions containing sculptures and a water feature. It also included paving, gravel areas, landscaping and the restoration of a bay window overlooking the courtyard. 

The Danish tax authority and the artist agree that this was a single supply. The Danish courts have asked whether the sculptures are the main element, whether the supply is goods or services, and whether they are works of art under Annex IX, Part A, point 3 of the VAT Directive. The answer decides whether the work was: 

- An artistic service eligible for exemption under a Danish standstill provision, with no VAT recovery on related costs 

- A supply of goods eligible for reduced valuation under Danish law as the first sale of an artist's own work of art, with an effective rate of 5% and VAT recovery on related costs 

The opinion isn't available in English, and the Advocate General heavily caveats it because the reference lacks background detail.  

On that basis: 

- Questions whether this is a single supply, and suggests the national court examine whether the paving and landscaping help the public enjoy the art in the best conditions, and whether a typical consumer would regard the bay window restoration as part of the installation 

- Assumes the physical transfer of the artwork is the main element, so the single supply is a supply of goods 

- Says the sculptures are undoubtedly works of art. He lacks the information to decide whether the pavilions are too, or whether they are inextricably linked to the sculptures, so he leaves that to the national court 

The UK has no exemption for artistic services, so this exact dilemma wouldn't arise here. The opinion may still interest you if you deal in works of art, particularly their eligibility for reduced VAT valuation on import or for the second-hand margin scheme. 

HMRC 

Carbon Border Adjustment Mechanism: new guidance published 

HMRC has published new and updated guidance on the Carbon Border Adjustment Mechanism (CBAM) on GOV.UK. Registration for CBAM opens on 1 January 2028. Record-keeping must start from 1 January 2027. 

The new pages cover: 

- Monitoring, verifying and reporting emissions 

- Default values 

- Getting the emissions intensity when importing CBAM goods 

- Illustrative rates and a worked example 

- Rates 

- Overseas installations that produce CBAM goods for export to the UK 

- Responsibilities for accrediting verifiers 

- Verifying emissions data 

- How to send HMRC questions 

HMRC has also updated its force of law notices, its policy summary (to reflect The Carbon Border Adjustment Mechanism (Emissions and Verification) Regulations 2026) and its record-keeping guidance. You can find everything from the GOV.UK page "Prepare for the Carbon Border Adjustment Mechanism (CBAM)". 

Our Environmental Services Group leads our CBAM support for clients, with help from our VAT team. 

VAT on cryptoassets: final guidance (GfC21) 

HMRC has published its final Guidelines for Compliance on the VAT treatment of cryptoassets, following an informal consultation this year to which Grant Thornton contributed. Until now, tax authorities and courts have given little guidance on the VAT treatment of cryptocurrencies and non-fungible tokens (NFTs), so businesses have had to work out the issues themselves. 

The guidance is for UK and overseas businesses whose cryptoasset activities may fall within UK VAT. It mostly links to existing VAT guidance, which suggests HMRC is fitting NFTs into the general rules rather than setting a separate policy. That's understandable while the EU and other tax administrations haven't reached a consensus. Its examples still focus on NFTs. 

Not much has changed since the draft, but these points matter if you are active in this area: 

- HMRC has removed the draft's statement that the guidance doesn't cover crypto transactions within the finance exemption (Schedule 9, Group 5). 

- The draft said that, if a customer gave no VAT number, you should treat the supply as business-to-consumer (B2C) and charge the VAT due in the customer's country. That is gone. The final version describes a VAT number as something a customer "may give" as evidence of business status. HMRC has also dropped the statement that a customer can't require business-to-business (B2B) treatment without a valid VAT number. 

- There are more detailed definitions of B2B and B2C supplies, and an expanded explanation of B2B place of supply for inbound and outbound supplies. 

- Digital service suppliers should consider whether the "use and enjoyment" rules apply. 

- A new section explains the reverse charge. The background section is shorter, with fewer definitions and no blockchain explanation. 

- The examples on finding out your customer's location and on digital platforms and marketplaces are revised, and the platforms section has a new example. 

HMRC asks businesses to review their treatment of cryptoassets against the guidance, check for errors, and consider whether to make a disclosure. If you correct a return, enter "GfC21" in the reason for error box.