Corporation tax
Taxpayers’ appeal on partnership and intangible fixed assets dismissed
The Court of Appeal (CA) has unanimously dismissed the taxpayers’ appeal in the case of Muller UK & Ireland Group LLP and others v HMRC. In 2013, three UK resident companies incorporated a limited liability partnership (LLP) and transferred their trades and certain assets to it. HMRC disputed whether intangible assets and goodwill transferred to the LLP should, as the taxpayers contended, be treated as falling within the intangible fixed assets regime of Part 8, Corporation Tax Act 2009 for the purposes of calculating the taxable profits attributable to each member of the LLP. This required consideration of the general rules for calculating the taxable profits arising to corporate partners from a trade carried on by a partnership – which requires computation of the profits as if a notional company were carrying on the same trade – and how the notional company concept interacted with Part 8 and, in particular, its rules on assets acquired from related parties.
The CA agreed with the 2024 decision of the Upper Tribunal (UT), that the absence of specific words treating the notional company as having the ownership attributes of the relevant partnership did not mean that the key related party provisions in the intangible fixed asset rules were incapable of applying. The CA agreed that, in order to calculate taxable profits, it was necessary to attribute the partnership’s ownership characteristics to the ownership of the notional company. Applied to the facts in this case, this meant each corporate member was to be considered a “related party” of the notional companies, and accordingly, the assets transferred remained outside of the scope of Part 8.
From the Business Tax Briefing dated 13 March 2026, published by Deloitte
Early redemption of loan notes and imported losses rules
The Upper Tribunal (UT) upheld the decision of the First-tier Tribunal (FTT) that the compensatory element of an early redemption as an imported loss was disallowable, but concluded that relief was available for the costs referable to the post-migration period.
Typically, losses relating to a period of non-residence are not relievable against UK income. In this case, a loss arose on the early redemption of loan notes, but the dispute was whether it was during the pre- or post-migration period. The FTT concluded that the whole loss related to the period of non-residence. The taxpayer appealed.
The loss, HMRC argued, related to the period of non-residence and the amount disallowed was broken down into three areas: the compensatory element of the premium for the early redemption, the unamortised issue cost and the unamortised discount on issue.
The UT found that the FTT did not focus on the commercial reality, that the issue costs were part of the cost of obtaining the proceeds of loan notes. When the loan notes were redeemed, the unamortised issue costs had to be written off as part of the loss on redemption. The commercial reality of this is that the costs were written off at the time of redemption and therefore in the post-migration period. The UT concluded that the unamortised discount was no different from the unamortised issue costs in this respect.
The UT concluded that the compensatory element was referable to the pre-migration period, but relief was available for the post-migration element.
From Tax Update March 2026, published by S&W Partners LLP
VAT
Reduced VAT rate for public EV charging
Charge My Street Limited (CMS) supplies electric vehicle (EV) charging to EVs at its charging stations in public places. CMS considered the reduced VAT rate of 5% applied to its supplies, on the basis that they fell within the de minimis limit for supplies of electricity and so were deemed to be for “domestic use”. HMRC ruled that the standard rate applied. The First-tier Tribunal (FTT) has agreed with CMS.
Under Note 5(g), Item 1, Group 1, Schedule 7A of the Value Added Tax Act 1994, the provision of electricity to a person at any premises at a rate not exceeding 1000 kilowatt hours (kWh) a month is deemed to be for “domestic use”. The FTT found that, contrary to HMRC’s arguments, “premises” did not require any concept of legal ownership by the recipient of the electricity, nor was it confined to buildings, but could include defined public spaces, such as car parks.
HMRC also argued that the “rate” at which electricity is provided must be calculated by reference only to the period during which the electricity was actually being provided, except for what HMRC referred to as continuous supply contracts. The FTT disagreed, accepting CMS’s approach that the limit is measured simply in terms of how much electricity is provided by a supplier to a person at any premises in the month in question, which for public EV charging would almost always be under the 1000 kWh limit. Accordingly, the FTT allowed CMS’s appeal in principle.
From the Weekly VAT News dated 9 March 2026, published by Deloitte
Pre-registration VAT
From 2009, Aspire in the Community (ACL) provided VAT exempt welfare services. Aspire in the Community Services Limited (ACSL) was incorporated in 2011, and later became a supplier to local authorities and clinical commissioning groups. As ACSL was not registered with the Care Quality Commission, its supplies would be taxable, and it formed a VAT group with ACL, with ACSL as the representative member. The effective date of registration was 1 May 2021, with ACSL subsequently making its first taxable supplies in November 2021.
On its first VAT return for the period 07/21, the VAT group claimed VAT on costs incurred pre-registration under VAT legislation allowing VAT incurred prior to VAT registration to be claimed as if it were input tax, subject to certain criteria. HMRC calculated the amount of VAT that the VAT group could claim by taking into account pre-registration use of the goods and services, which was to make wholly exempt supplies, and the estimated post-registration use, which was partly taxable.
ACSL argued that the partial exemption calculation should be based solely on the post-VAT registration current or future use of the goods and services. The First-tier Tribunal (FTT) has agreed with ACSL. HMRC exercised its discretion to treat all of the pre-registration VAT as input tax, and that is in the first VAT return that the taxable person is required to make. There is no basis for taking into account pre-registration use. The FTT upheld ACSL’s appeal against HMRC’s calculation of the VAT claimable. According to the decision, there are at least seven appeals stayed behind this appeal.
From the Weekly VAT News dated 9 March 2026, published by Deloitte
VAT treatment of plan bundles
Lycamobile UK Limited sold ‘plan bundles’ to UK customers, comprising rights to access telecommunication services, that is, telephone calls, text messages, and data. Lycamobile considered that for VAT purposes services within plan bundles were only supplied as and when the services were used. HMRC assessed Lycamobile on the basis that VAT was due when the customer purchased a plan bundle, irrespective of when, if ever, the services were used. In July 2024, the First-tier Tribunal (FTT) agreed with HMRC, subject to a potential adjustment for non-EU roaming charges pre-1 November 2017 (when supplies of business-to-consumer telecommunication services were not subject to UK VAT to the extent they were effectively used and enjoyed outside the European Union).
The Upper Tribunal (UT) has upheld the FTT decision. The UT considered the “simple question” at the heart of the appeal was whether Lycamobile was making a supply of services consisting of the allowances included in a bundle when the bundle was sold, or only making supplies when and to the extent those allowances were used. The UT concluded that the FTT correctly applied the law “and reached the right conclusion on this issue”. The UT also agreed with the FTT that ‘value added services’ included with certain bundles were not separate supplies, but ancillary to a single composite supply of telecommunication services. The UT also upheld the FTT’s finding that plan bundles were not vouchers, so the VAT rules relating to vouchers did not apply. The UT dismissed Lycamobile’s appeal. The UT also dismissed HMRC’s cross-appeal, concerning the requirement to make an adjustment for non-EU use and enjoyment. (HMRC had argued that the ancillary elements of a supply cannot play a role in determining any aspect of the supply’s VAT treatment.)
From the Weekly VAT News dated 23 February 2026, published by Deloitte
Practical Points
Every month, the Tax Faculty publishes short, practical pieces of guidance to help agents and practitioners in their day-to-day work.
