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And taxman changes policy on snowball cakes
HMRC have laid out their position on VAT grouping rules, following the decision by the Court of Justice of the European Union (CJEU) in Skandia America Corporation (USA), filial Sverige (C-7/13).
The case concerned the interaction of VAT grouping rules on transactions between parts of a business established both outside and inside Sweden.
The Swedish court system referred two matters of consideration to the CJEU:
- 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
- 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 European court noted that the main establishment of Skandia America Corporation and the VAT group under Swedish grouping provisions were separate taxable persons. It was found that the supplies were taxable transactions: the VAT group is liable for VAT under the reverse charge procedures, as the recipient of services.
The Revenue intends to review what impact – if any – the CJEU’s judgment has on UK rules and whether changes to legislation are required.
In other VAT news, the tax department is to change its policy on the classification of snowball cakes following Lees of Scotland and Thomas Tunnock Ltd (TC3754), in which the First-tier Tribunal ruled the items should be zero-rated. HMRC intend to update their guidance: to qualify as a zero-rated snowball, the cake must be a dome of marshmallow coated in any combination of chocolate, sugar strands, carob, cocoa or coconut, and may or may not include a jam filling.
