VAT Grouping Simplified?

There's been an interesting VAT ruling at the ECJ this week - in the Swedish case of Högkullen.

Here there was a corporate group that was partially exempt, providing real estate services.  The parent company delivered management, financial, investment, IT, and other group services.

The authorities were arguing that the management services for these areas formed a "single, unique supply".  If they were right, the full charge would be subject to VAT which the group companies wouldn't be able to recover in full.

The ECJ found in favour of the business and that single pricing or charging doesn't imply indivisibility of services.  Neither does the EC VAT Directive require / support there being a single supply.

In summary, intercompany charges remains a complex area.  In the UK, HMRC do not like charges that cannot be substantiated, and often there is no supply.  Now this adds another layer that once the charges can be substantiated, the VAT liability of each should be considered, rather than assuming it would all be subject to 20%.

If this impacts your group, or you have clients in this sector, please feel free to get in touch with VITA.  HMRC value compliance and it's important to demonstrate matters like this have been reviewed when making decisions on taxes.