VAT & Linked Supplies

HMRC Brief 01/26 – removal of linked goods concession

If you’ve ever wrestled with the complexities of VAT, you’ll know that sometimes the rules can feel like a maze. One area that’s caused confusion over the years is how to treat supplies that are linked together.

Should they be taxed as a single supply or as multiple, separate ones? For years, businesses relied on an Extra Statutory Concession (ESC) from HMRC, which allowed certain linked goods and services to be treated as a single supply for VAT, even if the law wasn’t entirely clear.

But as of HMRC Brief 1 (2026), that concession has been removed.

HMRC now believes that the law and case law already provide the right answer, and there’s no longer a need for a special concession.

In other words, if you’re supplying, say, a gift basket with wine and chocolates, or a hotel package with breakfast included, you don’t need to rely on the old ESC to treat it as a single supply for VAT. The statutory rules and recent court decisions already support this approach.

Let’s put this into context. Imagine you run a small business selling spa packages. In the past, you might have worried: “Do I need to split out the massage, the facial, and the glass of bubbly for VAT?” Thanks to the updated guidance, you can now look to the law and relevant cases, rather than hoping the ESC will cover you. It’s a bit like finally getting a clear map after years of following a hand-drawn sketch.

Of course, it’s still important to get the details right. HMRC will expect you to apply the law correctly.

You can find a link to the full briefing here: https://lnkd.in/eQWBF8uu