Commentary

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

Introduction

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.

Example

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

To continue reading
View the latest version of this document, as well as thousands of others like it, sign in to TolleyLibrary or register for a free trial