In the know: VAT - Issue two

By:

Sean Glancy ,

Lisa Burnside

on 19 Dec 2025

HMRC has announced several VAT changes, including new powers to extend final return deadlines, revised interest rates and plans to broaden relief for charitable donations. UHY’s latest In the know explains what these updates mean for businesses, charities and pension fund managers.

In this issue, we focus on HMRC’s major shift in VAT grouping rules and what it means for UK businesses with overseas branches. This change reverses the post-Skandia approach and restores the whole-entity principle, simplifying VAT accounting and potentially unlocking opportunities for historic VAT recovery.

We cover:

What has changed and why HMRC recalibrated its interpretation.
How the new rules affect cross-border intra-group services and reverse-charge obligations.
The potential for reclaiming overpaid VAT from the past four years.
Key considerations for partially exempt sectors and compliance risks.
Practical steps to review historic VAT treatment and prepare for future reporting.

Now is the time to assess your VAT position, identify reclaim opportunities and ensure your processes align with HMRC’s revised interpretation.