VATupdate Newsletter Week 43 2025

ASSEMBLY

This Week’s Top 3 VAT Highlights from the EU Court of Justice

ECJ C-234/24 – Brose Prievidza
The Court held that tooling retained abroad can still trigger VAT, even without physical movement of goods. Contractual control and economic ownership matter more than location.
ECJ C-232/24 – Kosmiro
Factoring and invoice-financing services are taxable supplies. The Court again drew a firm line between VAT-exempt financial intermediation and ordinary taxable services.
General Court T-575/24 – Digipolis (AG Opinion)
Associations charging their members for services make taxable supplies, not exempt internal transactions.

Furthermore, we had some UK judgments this week highlighting the limits of VAT exemptions and reasonable-excuse defences:

Illuminate Skin Clinics: Cosmetic treatments aren’t exempt unless the main purpose is therapeutic.
Five Star Homes and SM Development North West Ltd: No “reasonable excuse” for late filing and no input VAT on pre-registration purchases.

These cases underline HMRC’s strict approach and the courts’ narrow reading of VAT exemptions.

And that made me think of my daughter, who just got her own apartment. And, as all fathers probably do, I had to help with putting together an IKEA bookcase.

There are two kinds of people in this world.

The first kind opens an IKEA box, lays out every shelf, screw and tool, and studies the instruction booklet as if it were sacred text. They build methodically, Step 1 through Step 38, stopping only to ensure the tiny cartoon man’s expression of confusion doesn’t mirror their own.

The second kind takes one look at the manual, throws it away, and says, “How hard can it be?” They build intuitively. Until they realise they’ve attached the legs to the wrong side and have three leftover screws that must surely be “optional.”

Both will end up with something resembling a bookcase or a chair, but only one will trust it enough to sit on.

This divide between the literal and the interpretive isn’t only applicable to furniture assembly. You’ll find it in cooking, DIY, software coding, and yes, even in VAT. Some prefer to follow the rules as written, no deviation permitted. Others interpret the spirit of the guidance, confident that intent trumps form (and that the shelf will hold, even if it leans slightly).

But as these UK tribunal cases remind us, tax authorities are (usually) definitely in the first camp. When it comes to VAT exemptions and input tax recovery, there’s little room for “creative assembly.” The courts, too, have shown that “good faith” doesn’t excuse a missing bracket or a misaligned screw: the structure must be built exactly as designed.

So next time you’re building a VAT position, remember that even the most elegant structure can collapse if you skip Step 14b. And while IKEA furniture comes with a friendly tool, tax authorities do not.

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