The Upper Tribunal has handed down its decision in major litigation concerning the UK’s VAT grouping rules. Upholding the decision of the First-tier Tribunal, the UT decided that a US subsidiary of the Barclays group was not eligible to join the bank’s UK VAT group because a branch which it had set up in the UK did not constitute a “fixed establishment”. This was because it lacked the necessary human and technical resources as at the relevant date.
HMRC had also decided that, even if BSC was eligible to join Barclays’ VAT group, its application should be refused on the basis that this was necessary for the “protection of the revenue” (essentially because it was anticipated that very substantial VAT savings would be achieved if BSC joined the VAT group). The FTT determined this issue against HMRC. The UT concluded that the FTT had been wrong to do so, and held that HMRC could reasonably have refused the application on the basis of its protection of the revenue powers.
In addition, the UT also decided (in agreement with the FTT) that the UK’s VAT grouping regime cannot be interpreted consistently with EU law following the CJEU’s decision in Danske Bank.
Edward Waldegrave appeared for HMRC, led by Hui Ling McCarthy KC and Michael Ripley.
A copy of the UT’s decision can be found here.
