VAT basic principles

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What is VAT?

The UK value added tax (VAT) system is:

  1. •

    derived from the EU Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (the VAT Directive), and

  2. •

    mainly set out in the Value Added Tax Act 1994 (VATA 1994)

EU Member States also have a system of VAT. The UK ceased to be an EU Member State on 31 January 2020. On this date, the UK entered an implementation period (IP), during which it continued to be treated as a Member State for many purposes, and remained bound by EU law. The IP ended at 11 pm on 31 December 2020. On that date, a body of EU-derived rights and legislation, known as retained EU law (REUL), was converted into domestic UK law. For more on REUL and tax, see Practice Note: Retained EU law and tax.

On 1 January 2024, REUL that remained in force after the end of 2023 was recategorised as ‘assimilated law’. That recategorisation reflects a change in its status and treatment under UK law, in that assimilated law is

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Latest Tax News

FTT partially allows appeal in respect of VAT input tax claims (Eurocent (Buckingham) Ltd v HMRC)

Tax analysis: In Eurocent (Buckingham) Ltd v HMRC, the First-tier Tax Tribunal (FTT) allowed the appellant’s appeal in part, finding that certain invoices met the statutory requirements for the contents of a valid VAT invoice. The FTT also rejected HMRC’s contention that it was entitled to reject input tax claims, using its discretion under the VAT Regulations 1995, SI 1995/2518, reg 29(2), even if the VAT invoice was valid.

UT considers scope of VAT exemption for medical care (Illuminate Skin Clinics Ltd v HMRC)

Tax analysis: In Illuminate Skin Clinics Ltd v HMRC, the Upper Tribunal (UT) allowed the appellant’s appeal against a First-tier Tax Tribunal (FTT) decision that certain aesthetic, skincare and wellness treatments provided by a qualified doctor were not exempt supplies of medical care for VAT purposes. The UT held that the FTT erred in law by placing no weight on consultation records as evidencing diagnoses of recognised health disorders. The UT remitted the case to the FTT to be remade.

FTT finds that agency legislation applies to dog handlers (Tyler Security v HMRC)

Tax analysis: In Tyler Security Ltd v HMRC, the First-tier Tax Tribunal (FTT) dismissed the appellant’s appeal against a determination made by HMRC under the Income Tax (Pay As You Earn) Regulations 2003, SI 2003/2682, reg 80. The appeal concerned whether the agency legislation in sections 44–47 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) applied to the dog-handlers engaged by the appellant to provide services to end-clients.

Tax weekly highlights—23 October 2025

This week's edition of Tax weekly highlights includes: (1) News Analysis on the FTT’s decision in Lands Luo Ltd v HMRC which includes further consideration of the tests for allowing a late appeal following the recent Upper Tribunal decision in Medpro Healthcare Ltd v HMRC, (2) new regulations designating further special tax sites in relation to Anglesey Freeport and the Flintshire and Wrexham Investment Zone, and (3) the signing of a new tax treaty between the UK and Portugal.

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