Practical points: business tax July 2025

Corporation tax

Appeal on corporation tax relief for goodwill dismissed

The Upper Tribunal (UT) has dismissed the taxpayer’s appeal and HMRC’s cross-appeal in the corporation tax and stamp duty land tax (SDLT) case of Nellsar Limited. The case centred on the appropriate method for determining the value of goodwill arising from Nellsar’s acquisition of five care homes businesses. In particular, the value of the ‘identifiable assets’ – the freeholds in the care homes – under UK GAAP.

The taxpayer considered that the acquisition of the properties should be accounted for on a ‘depreciated replacement cost’ basis. However, the UT has upheld the First-tier Tribunal’s (FTT’s) conclusion that GAAP required the acquisition to be accounted for on a market-value basis, modified by special assumptions contemplated by RICS guidance. It also upheld the FTT’s conclusion that where a company prepares accounts which are non-GAAP compliant, the tax treatment should be decided as if GAAP-compliant accounts had been prepared. The UT dismissed HMRC’s cross-appeal on the FTT decision relating to the valuation of the properties.

Nellsar Ltd v HMRC [2025] UKUT 00164 (TC)

From the Business Tax Briefing 6 June 2025, published by Deloitte

VAT

Application of the VAT exemption for private tuition

The First-tier Tribunal (FTT) has considered together four appeals relating to the VAT exemption for the supply of private tuition in a subject ordinarily taught in a school or university, by an individual teacher acting independently of an employer. In each case, HMRC considered that the exemption did not apply to the dance and fitness classes offered by the appellants, so the appellants appealed against HMRC’s decision to register them for VAT. 

Three of the appeals concerned whether the classes constituted private tuition in a subject ordinarily taught in schools. The FTT has held that the tuition was not in subjects or activities that were commonly taught in schools or universities. Although some of the classes the appellants offered were dance, they were not the same activity as the subject of dance as commonly taught in schools. The fourth appeal related to the concept of private tuition, that is, whether the appellants, as members of a limited liability partnership (LLP), were acting on their own account and at their own risk, and hence independently of an employer. The appellant was successful as a matter of principle, but the parties agreed further discussions would be necessary to determine the VAT treatment of the classes offered, including to establish whether they related to activities commonly taught in schools or universities. 

Rushby Dance and Fitness Centre & Ors v HMRC [2025] UKFTT 594 (TC)

From the Weekly VAT News 9 June 2025, published by Deloitte

College of a university

Solent Pathway Campus Limited (SPCL), a joint venture partnership between Solent University and QAHE (Solent) Limited, provided education courses. SPCL claimed that its supplies were VAT exempt on the basis that it was providing education as an eligible body (as a college of a UK university) or, alternatively, was making supplies of teaching English as a foreign language (TEFL). HMRC refused SPCL’s claim. 

The First-tier Tribunal (FTT) has held that SPCL’s supplies were VAT-exempt education services. In determining whether SPCL was a college of a university, the FTT considered the five factors set out by the Supreme Court in the case of SAE Education Ltd and a number of other factors put forward by SPCL, and concluded that SPCL was a college of the University “due to the evident relationship between the… students and the University and the degree to which the activities of SPCL are recognised by and integrated with the University”. SPCL was therefore an eligible body. 

The FTT went on to consider SPCL’s alternative argument and concluded that SPCL was making single composite supplies of TEFL, based on the course content, the characteristics of the students (who come from outside the UK, without English as a first language, and are seeking to progress to degree courses at the University), and the qualifications of the tutors. The FTT allowed SPCL’s appeal against HMRC’s refusal of its claim. 

Solent Pathway Campus Limited v HMRC [2025] UKFTT 596 (TC)

From the Business Tax Briefing 6 June 2025, published by Deloitte

Whether zero-rating applies to Sensations Poppadoms 

Walkers’ Sensations Poppadoms are made of potato granules (18%), potato starch (18%) and modified potato starch (approx. 4%). They also contain gram flour and rice flour. Potato crisps are excepted from the VAT zero-rating, as are “similar products made from the potato, or from potato flour, or from potato starch”. The Upper Tribunal (UT) has upheld the First-tier Tribunal’s (FTT’s) decision that Sensations Poppadoms are “similar products made from the potato”, and accordingly standard-rated. The UT agreed with the FTT’s conclusion that the product is made from the potato, on the basis that “the potato” includes potato granules and that, accordingly, the potato content is 39-40%, which is “significant”, particularly relative to other ingredients. 

The UT also found that the FTT’s conclusion that Sensations Poppadoms are similar to potato crisps, based on a multifactorial assessment, was reasonable (which is the test on an appeal). The UT did note that while “it may be possible to disagree with the weight given by the FTT to individual elements of its multifactorial assessment”, the overall assessment was reasonable and the decision one that the FTT was entitled to make based on the evidence. The UT dismissed Walkers’ appeal against the FTT’s decision. 

Walkers Snack Foods Limited v HMRC [2025] UKUT 155 (TCC)

From the Weekly VAT News 2 June 2025, published by Deloitte

Application of temporary VAT reduced-rate

Ingliston Driving Experiences Ltd (IDEL) provides a range of driving experiences in various ‘supercars’ at off-road venues. Customers, accompanied by a professional driver, choose to either drive themselves or, sometimes with friends and family, be driven in a supercar in a simulated race. The First-tier Tribunal (FTT) has held that these services were chargeable to VAT at the reduced rates which applied to supplies of a right of admission to shows, theatres, circuses, fairs, amusement parks, concerts, museums, zoos, cinemas, exhibitions and similar cultural events and facilities from 15 July 2020 until 31 March 2022 (as a COVID pandemic measure). 

In reaching its decision, the FTT concluded that the supplies were the “right of admission”, giving these words their “plain and ordinary meaning”, as people had paid to be admitted to enjoy their driving experience. Turning to the issue of whether the supplies were a qualifying type of attraction, the FTT found, following guidance from the Court of Justice of the European Union in the case of Erotic Center, that the services provided a right to collective enjoyment (it was far from a solitary experience, given there were other cars being driven at the venues and the presence of others in the car); it did not matter that non-paying spectators were also present and the services were provided to a sufficient number of people. Finally, the FTT concluded that the experience was similar to a fair or amusement park: attendance was with the purpose of having an enjoyable experience and, like many fair and amusement park rides, it shared the features of speed, thrills and excitement. The taxpayer’s appeal against HMRC’s assessment was allowed. 

Ingliston Driving Experiences Ltd v HMRC [2025] UKFTT 564 (TC)

From the Weekly VAT News 2 June 2025, published by Deloitte

Mini umbrella company fraud

Impact Contracting Solutions Limited (ICSL) pooled the services of some 3,300 mini umbrella companies (MUCs), which supplied labour. HMRC considered that the arrangements between ICSL and the MUCs were contrived, and that the MUCs had failed to account to HMRC for VAT charged on their supplies to ICSL. HMRC denied ICSL the right to recover VAT charged by the MUCs (applying the decision in the case of Kittel), on the basis that the supplies were connected with the fraudulent evasion of VAT and that ICSL knew or should have known that. HMRC also informed ICSL that its VAT registration would be cancelled, on the basis that ICSL’s VAT registration was being used to facilitate fraud, based on the Ablessio principle. ICSL appealed against the denial of input tax recovery and the deregistration decision. As a preliminary issue, ICSL argued that Ablessio only applies to persons fraudulently defaulting on their own obligations (not facilitators of fraud), and that even if it did extend to facilitators, it would only apply where the facilitator had actual knowledge of the fraud. 

The Court of Appeal has ruled that HMRC has the power to deregister a taxable person where that person takes part in transactions connected with the fraudulent evasion of VAT, and knew or should have known that. The power to deregister can apply even if the person also made supplies that were unconnected with fraud. Deregistration must be proportionate. In these circumstances, deregistration would not breach the EU VAT principles of proportionality, fiscal neutrality or legal certainty (which still applied as the matters in question took place prior to Brexit). Accordingly, ICSL’s appeal on this preliminary issue of law was dismissed. Whether the particular facts of ICSL’s circumstances would justify deregistration remains to be considered. 

Impact Contracting Solutions Limited v HMRC [2025] EWCA Civ 623

From the Weekly VAT News 27 May 2025, published by Deloitte