Is river cruise business underpaying output tax?
Our business provides river cruises that last one hour and we charge £15; this is zero rated because the boat holds more than 12 passengers.
The boat consists of lower and first-floor decks and we sell refreshments from an outlet on the lower-floor deck. Some of the items we sell are zero rated, such as cakes and sandwiches, and we take the view that all sales of these items are zero rated because the customers will take them back to their seats. However, a colleague says that only the first-floor customers can benefit from zero rating because they are taking the refreshments away from the area where the outlet is placed, ie the lower floor. What do readers think?
Second, we do evening cruises where we charge £35 for a two-hour cruise, which includes a two-course meal and free glass of wine or a bottle of beer. Our view is that £30 is zero rated because two hours x £15 per hour relates to the travel, and therefore £5 including VAT relates to the standard-rated catering. However, the same colleague says that HMRC would challenge this method because the food and drink cost exceeds £5. Again, we would appreciate the thoughts of readers.
Query 20,719– River Thelma.
Cross-border tax treatment of disability benefit
My client is a Dutch national, returning to the UK in 2027 after ten years of Dutch tax residency in the Netherlands. She has UK settled status and her husband is a British national. Since late 2025, she has received Dutch UWV WIA-IVA of approximately €4,950 a month. This is a state disability benefit that is formally determined after appeal and is payable (without any need to reapply annually) until Dutch state pension age (about 15 years away).
We have queries on three points.
First, under EIM76009, is the IVA more comparable to exempt industrial injuries disablement benefit (which is also awarded for permanent disabilities), or to taxable employment and support allowance? I think the fact that the award does not have to be renewed periodically strengthens the argument that the IVA is ‘substantially similar’ to the former rather than the latter.
Second, does Art 17(1) of the 2008 UK-Netherlands double tax convention apply to IVA as a benefit paid under a social security system, or will HMRC consider that Art 21 (other income) applies?
Third, as the benefit exceeds €20,000 per year, does the Netherlands retain taxing rights under the treaty, and does the foreign tax credit mechanism reduce any resulting UK liability?
Our client qualifies for the foreign income and gains regime for years one to four; our query concerns years five to 15 (ie until our client reaches Dutch retirement age).
We would welcome readers’ thoughts.
Query 20,720– Amsterdam Tulip.
Is a donation to a charity really a donation?
I am a trustee of a VAT-registered charity that offers special swimming training and facilities to young people, particularly those people recovering from accidents or other injuries.
We have been asked to provide ten strong swimmers to help provide support at a local swimming gala; there is no payment to our charity, only a donation of £5,000 towards our charitable objectives. The gala is a high-profile event and will attract swimmers of all ages from across the UK, hence why the organisers need a lot of voluntary support. My view is that the £5,000 donation is outside the scope of VAT; one colleague agrees and referred me to the historic ECJ case of Tolsma, but another colleague says it should include 20% VAT because there is an intention of reciprocal performance, whatever that means. What do readers think?
Query 20,721– Daly.
Capital losses from years back
My client is always prompt with his tax return information and I am already working on his return for 2025-6. He realised a significant capital gain last year but has told me that he incurred a large capital loss some 15 years ago, which has never been used. I didn’t act for him then. I normally recommend that clients note capital losses brought forward on the white space on the return, but his previous adviser did not do this.
My client doesn’t have a copy of the tax return for 2010-11 (the year of the loss) but he does have a computation of the loss prepared by the adviser at the time. I don’t think there is any reason to prevent him from setting off the loss brought forward against the 2025-26 gain, but as I am not certain that the loss was ever agreed with HMRC (though I have no reason to think that it wasn’t), I do want to proceed with care.
Do readers think that I should use the loss in the tax 2025-6 computation without any explanation, or do I need a white space disclosure? I imagine that HMRC will have no record of the return going back that far so I suspect that, if I ask them, I will not get a meaningful response.
Query 20,722– Cautious.
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