In normal circumstances and where certain conditions are met, the transfer of a business from one entity to another is treated for VAT purposes as if there was no supply. In other words, no VAT is either chargeable or due in relation to the transaction. One of the conditions is that the assets being transferred must be used by the purchaser entity in carrying on the same kind of business as that formerly carried on by the seller entity. In the case of Intelligent Managed Services Ltd, the vendor carried on the business of operating a ‘banking platform’ which it sold to various third party financial institutions. The purchaser (Virgin Money Management Services Ltd) was a member of the Virgin Money Group (VMG) VAT Group when it acquired that business and, following the transfer, it provided services to other VMG Group members. At no time did the purchaser provide services from the acquired business to other businesses outside the VMG VAT group. On that basis, HMRC took the view that, as the VAT group rules ignore intra-group supplies, the purchaser was not ‘carrying on the same kind of business’. In other words, as the purchaser did not make supplies of banking platform services to third party customers, but instead only supplied them to fellow members of the VAT group, there could be no TOGC. The First-tier Tribunal agreed with HMRC but the Upper Tribunal overturned that decision. Following the CJEU’s decision in the Skandia case, a VAT group is a single taxable person for VAT purposes. As such, it is not appropriate to look at the acquisition of the business and assets by the single company but by the VMG VAT Group. In the court’s judgment, there is nothing in the VAT group rules that can prevent the transfer from being a TOGC. It was clear that the business was carried on within the group and the banking platform services were incorporated into the Group’s own retail banking services. The group continued to use the assets transferred in the same kind of business as that formerly carried on by the vendor.
Source: UK Case Alert : Intelligent Managed Services Ltd | LinkedIn
