HM Revenue and Customs Brief 37/14 - VAT grouping rules
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Published 13 October 2014
Purpose of this brief
This revenue and customs brief outlines HM Revenue and
position following the European Court of Justice (ECJ) judgment
in Skandia America Corp. (USA), filial Sverige (C-7/13). The case
concerned the interaction of VAT grouping rules on transactions between
establishments of a business established both outside and inside
Sweden. The ECJ
found that the effect of the Swedish rules was that there was a taxable
supply for VAT purposes. HMRC
is considering whether the judgment has any application to UK grouping
provisions, which are different to those in Sweden.
Skandia America Corporation is a company incorporated in the
United States. It has a fixed establishment in Sweden. The Swedish
branch became part of a Swedish VAT group.
The Swedish court referred 2 questions to the ECJ:
i) whether supplies of services from a main establishment in a
third country to its branch in a member state constitute taxable
transactions when that branch belongs to a VAT group in the member
state in which the branch is established; and, if so
ii) whether the person liable to pay the VAT is the supplier
(the main establishment in the third country) or the recipient (the VAT
group in the member state) of the services
noted that under Swedish grouping provisions, the main establishment of
Skandia America Corporation and the VAT group were separate taxable
persons and accordingly found that the supplies in question constituted
taxable transactions. Under the reverse charge procedures (Article 196
of the PVD), as the recipient of these services, the VAT group is
liable for VAT.
Impact on the UK
It is important to note that the UK VAT grouping rules differ
from the Swedish VAT grouping rules. The judgment did not consider what
the position under the UK rules should be nor did it consider whether
the Swedish rules were the only permissible VAT grouping rules.
Accordingly we will need to consider carefully what impact, if any,
this decision has on the UK rules and whether any changes to
legislation are required.
Action to take
is carefully considering the decision and will provide a further update
in due course. In the meantime, businesses should continue to follow
About the Author
© Crown Copyright 2014.
A licence is needed to reproduce this article and has been republished
for educational / informational purposes only. Article reproduced by
permission of HM Revenue & Customs.
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Article Published/Sorted/Amended on Scopulus 2014-10-17 09:00:10 in Tax Articles