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HMRC’s newly published Revenue & Customs Brief 2 (2015) (RCB 2/15) provides further guidance on the effect of the judgment of the Court of Justice of the European Union (CJEU) in Skandia America Corporation (USA), filial Sverige (C-7/13) on the UK VAT grouping provisions.
Skandia America Corporation was incorporated in the United States. The business had a branch in Sweden that became part of a Swedish VAT group. The local tax authority viewed services provided by Skandia America to its Swedish branch as taxable transactions.
HMRC’s newly published Revenue & Customs Brief 2 (2015) (RCB 2/15) provides further guidance on the effect of the judgment of the Court of Justice of the European Union (CJEU) in Skandia America Corporation (USA), filial Sverige (C-7/13) on the UK VAT grouping provisions.
Skandia America Corporation was incorporated in the United States. The business had a branch in Sweden that became part of a Swedish VAT group. The local tax authority viewed services provided by Skandia America to its Swedish branch as taxable transactions.
The company disagreed on the grounds the services were intra-company transactions and not supplies for VAT purposes. The CJEU ruled that the transactions were subject to VAT in Sweden.
The implication of the 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.
Businesses must treat intra-entity services provided to, or by, such establishments as supplies made to, or by, another taxable person and account for VAT accordingly:
- services provided by the overseas VAT-grouped entity to the UK one will normally be treated as supplies made in the UK under the place of supply rules, and subject to the reverse charge if taxable; and
- services provided by the UK establishment to the overseas VAT-grouped one will normally be treated as supplies made outside the UK under the place of supply rules.
The changes of treatment apply to services performed on or after 1 January 2016, and do not require change to UK law. They follow automatically in circumstances in which the overseas establishment is recognised as part of a separate taxable person.
RCB 2/15 expands on information in RCB 37/14.
