29th September 2021VAT Update from HW Fisher

This month Gerry Myton and Mike Block bring the latest updates from HMRC – including their guidance on the VAT liability of COVID-19 testing services and the VAT treatment of gaming machines. Gerry and Mike discuss the government’s plans for eight new Freeports in England and the potential advantages for businesses.

Read on for more updates and a summary of recent VAT cases.



Revenue and Customs Brief 11 (2021)

In HMRC’s business brief, HMRC have offered guidance on the VAT liability of COVID-19 testing services.

HMRC have stated that the service of COVID-19 testing services is treated as medical care where it involves the administration of the test to the patient, and the provision of the results by a medical professional.

Therefore exemption only applies where it is carried out and supplied by a relevant health professional or supplied by a hospital or state regulated institution.

Revenue and Customs Brief 12 (2021)

HMRC’s latest business brief discussed the VAT treatment of gaming machines from 6 December 2005 to 31 January 2013. This guidance has been released following a decision of the First-Tier Tribunal (FTT) of two cases heard together, The Rank Group Plc. and 2016 G1 Limited. The brief sets out how customers with appeals related to the VAT treatment of gaming machines can claim refunds of VAT.

In the appeals, the FTT found that the treatment of gaming machines was exempt from VAT, and that there had been a breach of fiscal neutrality. HMRC have confirmed that they will accept valid claims that are made within the relevant deadline, and only where the claimant has a related valid appeal lodged with the Tribunal.

Option to Tax

In an effort to assist businesses due to the COVID-19 pandemic, HMRC temporarily extended the deadline for businesses to notify options to tax. The deadline, normally 30 days, was extended to 90 days and applied until 31 July 2021.

With effect from 01 August 2021, businesses now have only 30 days to notify HMRC of any options to tax.




The government has recently announced their plans for 8 new Freeports in England.

Freeports, for VAT and Customs Duty purposes, act as suspension areas that remains outside of the UK. Any goods stored in the Freeport is deemed not be in the UK for Duty purposes. But what does this mean?

Freeports offer many advantages to businesses, the main one being that Duty is suspended whilst the goods remain at the Freeport. This means no Customs Duty, import VAT or Excise Duty is payable until the goods leave the Freeport.

Another benefit of Freeports is that in addition to goods being stored at the Freeport, they can also be processed within the Freeport. This means that there is potential for goods to arrive in the UK, be processed in the UK and then be exported from the UK with no Duty payable.

However, businesses should be aware that goods imported into a Freeport for processing will not be treated as originating in the UK and will not benefit from the UK-EU Trade and Cooperation Agreement enabling tariff-free movements between the UK and the EU.

CHIEF & Customs Declaration Service

HMRC have now confirmed that the Customs Handling of Import and Export Freight (CHIEF) system will be completely closed on 31 March 2023. CHIEF has been replaced with the Customs Declaration Service (CDS) system.

The closure will happen in 2 stages:

  • 30 September 2022 – businesses will no longer be able to submit import declarations
  • 31 March 2023 – export declarations will close



Claims Advisory Group Limited v. HMRC

The Upper Tribunal (UT) have now released their decision on this case which concerns the VAT treatment of PPI claims made by Claims Advisory Group Limited (CAGL) on behalf of individual customers who have been mis-sold payment protection insurance (PPI) by financial institutions.

The issue in this case was whether the services provided by CAGL were exempt as an insurance transaction or an exempt insurance intermediary service.

The  First-Tier Tribunal (FTT) originally found that the services provided by CAGL were subject to VAT at the standard rate, as it did not fall within the scope of exemption applicable to supplies of insurance. CAGL appealed to the UT on the basis that the FTT erred in law.

In their decision, the Upper Tribunal has agreed with the FTT that claiming PPI compensation on behalf of individuals is not an exempt supply of insurance services and CAGL did not act as an insurance intermediary, therefore the services are subject to VAT.

One Motion Logistics Limited v. HMRC

This case involves an appeal against VAT surcharge penalties and whether there was a reasonable excuse for late payment.

One Motion Logistics Limited (OML) entered the default surcharge regime for a late payment in period 08/16. OML was directed by HMRC to make payments on account on 22 November 2017. Subsequent payments were made late for the 02/18 and 05/18 VAT periods.

OML appealed on the basis that they had reasonable excuse for the defaults, contending that the surcharge liability notice letter for period 02/18 was never received and they did not know that the 7 day extension was not available for payments on account.

The Tribunal dismissed the appeal on the basis that although it was clear that OML believed the seven-day extension was available; they did not pay close attention to the 22 November letter issued by HMRC. OML relied on the reminder from HMRC, and the Tribunal held that this is not something a reasonably acting person would have done.

Scanwell Logistics (UK) Limited v. HMRC

This case was held at the First Tier Tribunal (FTT) and concerned whether Onward Supply Relief (OSR) was available to Scanwell Logistics (UK) Limited (Scanwell) who had been appointed as an import agent.

Scanwell acted as an import agent for a number of consignments of goods coming from China. Scanwell arranged onward transport to other EU member states, and claimed exemption of import VAT under OSR.

HMRC contended that OSR was not available to Scanwell and assessed them for circa £5.7m of VAT. The FTT has agreed with HMRC on the basis that Scanwell never acquired legal title of the goods, and they had not made a supply of the goods using the imported goods, therefore the conditions for OSR were not met and did not apply.

It is important to note with this case, that since Brexit, Onward Supply Relief is limited for goods being imported via Northern Ireland and onto the EU.


For any questions, or to discuss your specific circumstances, please get in touch with Mike Block or Gerry Myton.

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Mike Block
Director - VAT

020 7380 4987
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Gerry Myton

020 7874 7982
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