This year’s Budget didn’t contain significant VAT changes but there were several targeted reforms and consultations aimed at overseas supplies, the platform economy, as well as VAT compliance and VAT administration.

There were some important announcements and measures in the Budget that will require careful consideration for many organisations in the coming months, especially once further details will be confirmed for some of the changes.

Key VAT measures

Changes to the reverse charge on overseas services

From April 2027, the reverse charge mechanism for services received from overseas will only apply to UK VAT-registered businesses. Overseas suppliers making supplies to UK businesses that are not VAT registered will, in many cases, be required to register for VAT and account for UK VAT directly rather than relying on the customer to apply the reverse charge. This aligns with many other countries that already apply B2C rules for overseas suppliers where their services are supplied to recipients that are not VAT registered.

It is currently unclear how this measure will be implemented. However, this change is expected to increase compliance obligations for non-UK suppliers while reducing what HMRC perceive to be VAT leakage by unregistered businesses in the UK not accounting for reverse charge VAT.

It will be a welcome change for businesses and charities that may otherwise trigger a VAT registration solely because of the reverse charge.

New VAT relief for social housing land

A zero rate of VAT for land sold to registered social housing providers will be introduced from 1 April 2027. This is a welcome change for the sector and should help to expedite the construction of social housing. It will remove some of the complexities involved when developing new social housing and puts an end to “golden brick” VAT arrangements, where construction work had to reach a certain stage before the land and partially completed development could be sold on a zero-rated basis.

New powers and safeguards for Form VAT126 claims

The government has announced that it will introduce new measures to provide powers and safeguards for claims made through Form VAT126. This applies to certain local authorities, charities, museums and galleries but mainly academy schools and multi-academy trusts. Although full details are not yet available, the government may be seeking to align the treatment with the terms and conditions that apply to VAT-registered organisations, such as penalties for incorrect claims and a four-year period in which to correct errors.

Temporary zero-rating of domestic electricity

The government confirmed that the temporary zero rate of VAT for qualifying domestic electricity supplies in Great Britain, including certain charitable use, will be extended to July 2027. This will extend support for households facing elevated energy costs through the winter season.

Extension of online marketplace VAT liability

Building on previous platform economy reforms, from October 2027, online marketplaces such as eBay and Amazon, will also become responsible for collecting VAT on certain sales made through their platforms by UK sellers exceeding the VAT registration threshold on the online marketplace, as well as overseas sellers. The measure is intended to improve VAT collection and reduce non-compliance in online trade. However, this puts an increased administrative burden on the online marketplaces.

Electric vehicle charging

Public and workplace charging will be subject to the standard rate of VAT from 1 November 2026 as the government has confirmed that it does not qualify as domestic use and therefore cannot benefit from the reduced rate of VAT.

Tour operators margin scheme

As well as confirming that taxi firms cannot use the scheme, the government announced a welcome review of the scheme overall and whether it is still fit for purpose. A consultation has been launched and will run from 28 October to 31 January 2027.

New zero rate for donated medicines

A new VAT zero rate will be introduced for qualifying donated medicines. The change is intended to remove VAT costs that may arise when medicines are donated for charitable or public benefit purposes.

Medical deputies

Currently, the supply of a deputy for a medical practitioner can qualify for VAT exemption where the deputising service involves the provision of medical care. From 1 May 2027, the legislation will be amended to exclude these services from the exemption, meaning they will instead be subject to the standard rate of VAT.

VAT administration and compliance

E-invoicing roadmap

The government has reaffirmed its commitment to mandatory e-invoicing and digital reporting. Detailed policy and technical requirements are expected to be published by April 2028, ahead of mandatory implementation from April 2029. The measure is intended to reduce compliance costs, improve VAT reporting accuracy and help narrow the VAT gap, but it remains to be seen whether the implementation timetable is realistic, given the experience of MTD.

This is a measure that will require operational and systems changes over the next 12–24 months, which will need to be considered in due course.

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