Apart from the main policy issues announced in the chancellor’s statement dozens of smaller changes have been announced – the devil is indeed in the detail. A small number of VAT changes were announced as well as plans for future consultations.
Private Hire Taxi Operators
After HMRC lost at the Upper Tribunal regarding whether private hire taxi services fell within the Tour Operators Margin Scheme (TOMS), the Government will now change the law so that these services are specifically excluded from TOMS if they are not supplied with other travel services.
The change will take effect on 2 January 2026.
Goods donated to charities by businesses
When businesses donate goods to charities for their own use they currently may need to account for output tax on the value of the gifts if they exceed the annual limit for business gifts. This has always seemed anomalous as goods donated for resale are zero rated.
From 1 April 2026 VAT relief will be extended to certain goods donated to charities that the charities use or distribute. There will be limits on the value of items that can be donated free of VAT and some items will not be eligible – HMRC will publish further guidance.
Motability scheme top up payments.
Where top up payments are made from the recipient’s own funds to lease higher-value cars, the leasing payment will be standard rated to the extent that it is funded in this way.
This does not affect the zero rating of vehicles that have been permanently adapted for use by a disabled person.
The change will affect leases taken out on and after 1 July 2026.
VAT groups
Since 2015 certain charges received from VAT group members in EU countries have been subject to the reverse charge in the UK. This policy has now been reversed. Businesses that may have paid too much VAT may now be able to make a claim for repayment of VAT (See HMRC Revenue and Customs Brief 7(2025) for the update to the VAT grouping rules).
The change takes immediate effect (26 November 2025).
FUTURE DEVELOPMENTS
E-invoicing
The Government plans to introduce mandatory e-invoicing for VAT invoices in 2029. HMRC will start discussions with interested parties in 2026 about how this can be achieved.
Land intended for the construction of social housing
Social housing providers generally cannot claim VAT on the cost of acquiring land and constructing new houses as they make mainly exempt supplies (letting the houses). If the land is subject to VAT this involves complicated procedures, involving the “golden brick”, in order to avoid a substantial VAT liability. This sometimes makes the construction of social housing slower and more expensive than it need be.
HMRC will be consulting on how VAT relief can be extended to cover the sale of land to social housing providers.
Collection of VAT
HMRC will be consulting on measures to improve the collection of VAT including mandatory payment by direct debit. Penalties for late payment will be increased from 1 April 2027.
Deposit Return Scheme
HMRC will be making changes to the scheme, which is due to be introduced in 2027, so that the VAT on unreturned deposits is accounted for by the Deposit Management Organisation rather than the producer.