This brief follows on from Revenue and Customs Brief 2 (2015)
(10 February 2015). This set out the position of HM Revenue and Customs
following the decision of the Court of Justice of the European Union (CJEU)
in Skandia America Corp. (USA), filial Sverige (C-7/13).
This Brief confirms the UK VAT changes resulting from the
Skandia judgement and provides details of which other member states
operate ‘establishment only’ VAT grouping.
Who should read this
UK VAT-registered traders who are members of a VAT group in
the UK or another EU member state, and have establishments (branches or
head offices) in other member states.
Details of the Skandia America Corporation decision can be
found in Revenue and Customs Brief 2 (2015). This outlines the VAT
treatment that applied before the Skandia decision, how VAT treatment
will change as a result of the judgment and the date when the change
will take effect.
VAT changes with effect from 1 January 2016
The following changes are for UK VAT purposes, covering
supplies treated as made in the UK under place of supply rules and
input tax recovery by UK VAT registrations.
The implication of the Skandia judgment is that an overseas
establishment of a UK-established entity is part of a separate taxable
person - if the overseas establishment is VAT-grouped in a member state
that operates similar ‘establishment only’ grouping provisions to
Sweden. This will be the case whether or not the entity in the UK is
part of a UK VAT group.
Therefore businesses must treat intra-entity services provided
to or by such overseas establishments as supplies made to or by another
taxable person and account for VAT accordingly:
services provided by the overseas VAT-grouped establishment
to the UK establishment will normally be treated as supplies made in
the UK under place of supply rules, and subject to the reverse charge
services provided by the UK establishment to the overseas
VAT-grouped establishment will normally be treated as supplies made
outside the UK under place of supply rules. Therefore they will need to
be taken into account in ascertaining input tax credit for the UK
establishment. If the supplies are reverse charge services, they should
be reported on the trader’s European Sales Listing of such supplies
If the UK entity is in a UK VAT group, the same applies to
supplies between the overseas establishment and other UK VAT group
members in the UK. Under these circumstances the anti-avoidance
legislation in VATA s43(2A)-(2E) does not also apply, as the overseas
establishment is not seen as part of the UK VAT group.
These changes of treatment do not require any change to UK
law, they follow automatically in circumstances where the overseas
establishment is recognised as part of a separate taxable person
As announced in February 2015 in Revenue and Customs Brief 2
(2015), these changes in treatment must be applied to services
performed on or after 1 January 2016. Businesses may choose to apply
the changes to services performed earlier than this date, provided they
do so consistently for all services and establishments affected.
The above changes are only required where the member state of
the VAT-grouped overseas establishment has implemented the Skandia
decision and is requiring intra-entity transactions between this
establishment and the UK establishment to be treated as supplies for
VAT purposes. The overseas establishment should take steps to establish
with its member state tax authorities if this is the case.
In particular, in the UK’s view the UK VAT changes are not
required if the only VAT grouping is of the UK establishment. UK VAT
grouping is ’whole entity’ and does not split the UK establishment off
into a separate taxable person. The UK has informed other member states
of the UK’s view on this matter.
on other member states’ VAT grouping
The following table outlines how the UK expects member states
to operate VAT grouping in the light of the Skandia decision. This
information is provided as a guide only. It is the responsibility of
individual businesses to check with the relevant member state tax
authority to confirm the situation and agree how it applies to their
own particular circumstances.
Cyprus, Finland, Germany, the Netherlands
At the time of publication the intention of these
member states is uncertain
Austria, Ireland, UK
does not expect these member states to apply ‘establishment only’ VAT
grouping to create intra-establishment supplies
Italy, Romania, Spain (basic method)
Italian, Romanian and basic Spanish ‘VAT grouping’ is
purely administrative, treating each member as a separate taxable
person and just amalgamating their VAT figures on a single return. Such
‘grouping’ does not trigger the UK VAT changes above
Belgium, the Czech Republic, Denmark, Estonia, Hungary,
Latvia, Slovakia, Spain (advanced method), Sweden
expects these member states to apply ‘establishment only’ VAT grouping
to create intra-establishment supplies
Bulgaria, Croatia, France, Greece, Lithuania,
Luxembourg, Malta, Poland, Portugal, Slovenia
understands these member states do not have VAT grouping
I contact for further information
If you have any questions about this Revenue and Customs
Brief, please contact your Customer Relationship Manager (if one is
allocated to your business) or the VAT Helpline on Telephone: 0300 200