The Government has introduced a temporary reduction in VAT from 20% to 5% on certain supplies aimed at children and families as part of its “Great British Summer Savings” initiative. The measure applies between 25 June and 1 September 2026 and is intended to support household spending and the leisure sector during the peak summer period. 
 
The reduced rate applies to children’s meals and admissions to family attractions, including cinemas, theatres, theme parks, zoos, museums, exhibitions, aquariums, and similar venues. To qualify, supplies must be clearly aimed at children or families and appropriately marketed, priced, and described as such. The Government’s intention is that the VAT savings will be passed on to consumers, but there is no legal requirement for suppliers to do so.  
 
Businesses must take care to apply the reduced rate only where the conditions are met. Mixed supplies, bundled tickets, and unclear pricing structures may create VAT risk if the reduced rate is applied too broadly or inconsistently. It is also important to note that the application of the reduced rate is not optional - if you meet the conditions, you cannot choose not to apply it as the measure has been introduced by secondary VAT legislation.  
 
This measure requires swift action. Affected businesses should ensure VAT accounting systems, processes and prices are updated correctly, and that staff understand which supplies qualify. HMRC scrutiny is to be expected, therefore it will be important to ensure that adequate VAT records and evidence of meeting the relevant conditions is maintained where the reduced rate has been applied. 

Queenscourt Ltd vs HMRC [2026] UKUT 00195 (TCC) 
 
This Upper Tribunal case considered whether dip pots supplied with KFC meal deals formed part of a single standard‑rated composite supply or were separate zero‑rated supplies within a meal deal package. HMRC argued that although the overall supply was accepted to be a multiple supply, the dips were ancillary to the hot meal element of the supply and should therefore follow the standard‑rated treatment of the hot meal. 
 
The UT disagreed, however, finding that the dip pots were separately identifiable supplies and should be zero‑rated in their own right. This overturned HMRC’s assessments and introduced some uncertainty in respect of whether multiple supplies should always be recognised separately or whether one can still be incidental if it is an element that is genuinely only incidental to another. 
 
The decision is particularly relevant for the food and hospitality sector, where meal deals and bundled products frequently include items with different VAT liabilities. The ruling suggests that HMRC’s preference for composite treatment will not always succeed. 
 
Businesses offering bundled food products should review their VAT treatment carefully. Where items are optional, priced separately, or retain their own commercial significance, there may be scope to apply different VAT rates — with potential refund opportunities for historic overpayments of VAT. 

HMRC v Bolt Services UK Limited [2026] EWCA Civ 720 
 
This Court of Appeal judgement overturned earlier tribunal decisions and held that Bolt’s ride‑hailing services do not fall within the Tour Operators’ Margin Scheme (TOMS). As a result, VAT must be accounted for on the full passenger fare, not just Bolt’s margin. 
 
The central issue was whether Bolt’s supplies were sufficiently comparable to those of travel agents or tour operators. Rejecting the “high‑level” approach adopted by the First-tier and Upper Tribunals, the Court held that TOMS applies only where services are “identical or at least comparable” to those traditionally supplied by those sectors; and Bolt’s on‑demand point‑to‑point journeys were not. 
 
The Court therefore concluded that the earlier tribunals had interpreted TOMS too broadly, and that the scheme must be applied narrowly in line with its purpose. Having found the comparability test was not met, the Court did not need to rule on whether Bolt’s services were materially altered.  
 
This judgment significantly narrows the scope of TOMS for platform businesses and creates material VAT exposure across the ride‑hailing sector, with implications for cases such as Uber and historic liabilities exceeding £1bn. However, this ruling may be helpful for many businesses that have in the past been inadvertently fallen within the TOMS regime, when their core businesses were not in any way comparable to travel agents or tour operators. Affected businesses should review their VAT position urgently, focusing on whether their supplies are genuinely comparable to traditional TOMS activities, and be prepared for increased HMRC scrutiny and potential assessments. 

Barclays Services Corporation and Barclays Executive Services Limited vs HMRC [2026] UKUT 00211 (TCC) 
 
The Upper Tribunal has ruled in favour of HMRC in a case involving Barclays and its attempt to include a US‑based group company in its UK VAT group. Barclays sought to do this to avoid VAT charges on services provided to UK entities, which would have delivered significant cost savings. HMRC rejected the application, and that decision has now largely been upheld. 
 
A key question was whether UK VAT rules could be restricted in line with an EU court decision in the case of Danske Bank, which limits VAT grouping across borders. The UT confirmed that UK law does not allow this approach and that VAT grouping in the UK applies to entire legal entities, not parts of them. Any such change would require new legislation, not reinterpretation by the courts. 
 
The UT also agreed with HMRC that the US company did not have a sufficient business presence in the UK to qualify for VAT grouping. Although it had a UK branch, this branch did not have enough people, systems or control over resources to be considered a “fixed establishment” for VAT purposes. Simply having access to facilities or staff was not sufficient. 
 
Finally, the UT indicated that HMRC could also have refused the application to protect tax revenues, given the limited UK activity and the scale of the VAT advantage sought. Overall, the decision reinforces that VAT grouping remains tightly controlled and that overseas companies must demonstrate real UK substance before seeking to eliminate VAT costs through group registration. 
 
Multinational organisations should carefully consider their VAT grouping arrangements, particularly where overseas entities provide services connected to UK operations. Assumptions around fixed establishments and grouping eligibility may no longer withstand HMRC challenge. 

HMRC has updated its VAT guidance to clarify when employers can recover VAT on costs incurred by occupational pension schemes, including investment management fees. This marks an important development for businesses that sponsor defined benefit or defined contribution pension schemes, as investment costs have historically been a contentious area for VAT recovery. 
 
Under the revised guidance, employers may recover VAT on pension investment costs where the employer is the recipient of the supply for VAT purposes. This typically requires the correct contractual and invoicing arrangements, such as services being contracted for by the employer or the trustees charging the employer onward for those services. Where structured correctly, VAT recovery can extend beyond administration costs to investment-related fees. 
 
Significantly, HMRC has confirmed that VAT on pension investment costs does not require dual‑use apportionment simply because the scheme benefits employees. Instead, these costs can be treated as the employer’s input tax, subject to the employer’s normal partial exemption position. This simplifies compliance and may improve cash flow for many businesses. 
 
The update presents a valuable opportunity for employers to review both current arrangements and historic VAT treatment. Businesses should ensure their pension scheme documentation, invoicing flows and VAT group structures align with HMRC’s expectations and consider whether previously irrecoverable VAT can now be reclaimed. 

Clearwater Hampers Limited v HMRC [2026] TC09843 
 
The First‑tier Tribunal has ruled in favour of Clearwater Hampers Limited in a VAT dispute with HMRC concerning the correct VAT treatment of gift hampers. The case focused on whether the wicker baskets used to package food and drink hampers should be treated as separate, standard‑rated items or as part of a single supply with the contents. 
 
HMRC had argued that certain lidded wicker baskets were “hampers” in their own right and should therefore attract VAT at 20%. Clearwater contended that the baskets were simply packaging used to present and protect the food and drink, and were not purchased by customers as standalone products. 
 
The FTT agreed with Clearwater, concluding that the baskets were ancillary to the main supply of food and drink. From the customer’s perspective, the value lay in the contents of the hamper, with the basket serving a supporting role rather than being an end in itself. As a result, the VAT treatment followed that of the contents rather than being standard‑rated. 
 
This decision is an important reminder that VAT treatment depends on commercial reality rather than form or HMRC guidance alone, which in itself tends to be subjective and fact-dependent. Businesses selling bundled or packaged products should review whether packaging and presentation items are genuinely separate supplies, as incorrect treatment can lead to overpaid VAT or unexpected liabilities.