Measure

VAT grouping

The measure

The eligibility criteria to join a VAT group will be extended to include certain non-corporate entities.

In addition, revised VAT grouping guidance will be issued to:

  • amend the definition of ‘bought in services’ to ensure that when such services are recharged by overseas branches they are subject to UK VAT; and
  • provide clarity to businesses on HMRC’s protection of revenue powers and treatment of UK fixed establishments.

 

Who will be affected?

The change to the eligibility criteria may affect corporate groups that have within their group structure certain non-corporate entities (e.g. partnerships) which may benefit from VAT grouping. 

It is anticipated that the revised definition of bought in services will affect UK VAT groups that are not entitled to full VAT recovery and that have overseas branches.

The clarification to protection of revenue powers and treatment of UK fixed establishments will be relevant to all taxpayers.

 

When will the measure come into effect?

The government will legislate in Finance Bill 2018/19 to extend the VAT grouping eligibility criteria to include certain non-corporate entities.

The VAT grouping guidance changes will be published in draft and will be finalised by 1 April 2019.

Our view

Extending the eligibility criteria is as expected and follows an HMRC consultation. 

Whilst we await further details it would appear that amending the definition of ‘bought in services’ follows a previous HMRC consultation and is as a consequence of the Court of Justice of the European Union decision in the case of Skandia America Corporation (C-7/13).

Contact

Daniel Lyons

Daniel Lyons

Partner

Head of Tax Policy & Indirect Tax Policy Lead