UK VAT Grouping: Fixed Establishment and Protection of the Revenue (Barclays)

DLA Piper’s UK VAT Grouping – Fixed establishment and protection of the revenue reports on whether Barclays Services Corporation (BSC), a US group company with a UK branch, could join the UK VAT group of Barclays Execution Services Limited from 1 December 2017. HMRC refused on two grounds: BSC had no UK fixed establishment, and admission would be contrary to the protection of the revenue provisions (VATA 1994 s.43B(5)(c)). [jdsupra.com]

The Upper Tribunal concluded that the First‑tier Tribunal had been entitled to find BSC’s UK branch lacked sufficient human and technical resources on the application date, so the fixed‑establishment appeal was dismissed. On the second ground, the Tribunal held HMRC could reasonably have relied on its protection‑of‑the‑revenue power—overturning the FTT’s contrary view—citing the comparable significance of the VAT saving versus the UK activities, and the taxpayer’s motives. [jdsupra.com]

Crucially, the Tribunal rejected HMRC’s argument (based on Danske Bank, C‑812/19) that UK grouping rules should be read as applying only to a UK establishment of an overseas company, endorsing the UK’s longstanding “whole establishment” approach—still reflected in HMRC’s published guidance notwithstanding Skandia and Danske Bank. As Simmons & Simmons observes, while the taxpayer lost on the facts, the decision broadly supports overseas entities using UK VAT grouping via a UK fixed establishment. Multinationals should ensure any UK branch has demonstrable resources, operational control and permanence before applying, and review existing structures. [jdsupra.com], [simmons-simmons.com]