V3.267 Intra-group supplies—imported services

Part V3 Supplies, acquisitions and imports

V3.267 Intra-group supplies—imported services

V3.267 Intra-group supplies—imported services


FA 1997 introduced new anti-avoidance provisions1 in relation to VAT groups. The provisions are aimed at a scheme which enabled a partly exempt business to avoid a VAT charge in respect of certain services by routing those services through an overseas group member.


X is a member of a partly exempt VAT group. It wishes to obtain the services of B, a UK firm of consultants, without incurring the VAT charge which would normally be associated with such a supply (since the majority of such VAT would not be recoverable by the VAT group).

X arranges for B to supply its services to Y, a member of the same VAT group as X. Although Y is established in the UK, thus enabling it to be a member of the VAT group2, the services are supplied to its offices in Bermuda, and are therefore outside the scope of UK VAT3. Y then resupplies the services to X Ltd; this supply is disregarded for VAT purposes by virtue of the grouping provisions4. Thus X avoids an irrecoverable VAT charge5.

Effect of the legislation

Put simply, VATA 1994, s 43(2A)–(2E) provides that the disregarding of intra-group supplies is set aside in specific circumstances, ie the supply by Y to X in the above example is treated as if X and Y were not members of the same VAT group.

The legislation from 1 January 20106

A supply between two members of a VAT group ('the supplier' and 'the UK member') is not

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