The recent European tax ruling in the Skandia case involving VAT grouping issues means that HMRC has been forced to update its briefing on the VAT grouping rules to reflect additional information about VAT grouping in the Netherlands and Spain, whch come into force in January
In October, the UK announced it is to change VAT rules for supplies treated as made in the UK under place of supply rules, following the decision of the Court of Justice of the EU in Skandia America Corp (USA), filial Sverige (C-7/13).
The VAT changes will come into force from 1 January 2016. The implication of the Skandia judgment is that an overseas establishment of a UK-established entity is part of a separate taxable person - if the overseas establishment is VAT-grouped in a member state that operates similar ‘establishment only’ grouping provisions to Sweden. This will be the case whether or not the entity in the UK is part of a UK VAT group.
Therefore, businesses must treat intra-entity services provided to or by such overseas establishments as supplies made to or by another taxable person and account for VAT accordingly.
