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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 Customsí (HMRC) 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

The ECJ 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

HMRC is carefully considering the decision and will provide a further update in due course. In the meantime, businesses should continue to follow existing guidance.

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

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