Commentary

RCB/22/15 Changes to VAT regulations following judgment in the case of Le Credit Lyonnais (C-388/11)

Part V16 Forms and other HMRC material

RCB/22/15 Changes to VAT regulations following judgment in the case of Le Credit Lyonnais (C-388/11)

RCB/22/15 Changes to VAT regulations following judgment in the case of Le Credit Lyonnais (C-388/11)

Revenue & Customs Brief, Issue 22. 11 December 2015

Purpose of this brief

This brief gives notice of changes to UK legislation following the decision of the Court of Justice of the European Union (CJEU) in Le Credit Lyonnais. You can read the full text of the decision on the curia.europe.eu website.

Readership

Partly-exempt businesses with establishments both within and outside the UK will need to be aware of these changes. Financial institutions, such as banks and insurers, are most likely to be affected.

Background

In Le Credit Lyonnais the CJEU found that the VAT Directive could not be interpreted so as to allow a company to take into account the turnover of its foreign branches when calculating how much input tax it can deduct in the member state where it has its principal establishment, using a “single pot” calculation. It also found that a sector in a partial exemption method could not be based on a geographic location.

To reflect that decision, the March 2015 Budget announced our plans to exclude supplies made by overseas branches from partial exemption methods. As a result of feedback on the subsequent consultation, we have narrowed the scope of changes to those set out below.

We exposed draft regulations to implement the necessary changes for a limited consultation in October 2015. We have revised the draft

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