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Businesses with intra-company supplies involving EU establishments could be affected by a recent ECJ ruling.

This impacts on intra-company supplies to an overseas establishment which is VAT-grouped in Sweden and other similar EU Member States which have yet to be confirmed.

HMRC recently issued a Revenue and Customs Brief notifying the outcome of its considerations in relation to the ECJ judgment in the Swedish VAT case of Skandia America Corp ('Skandia'). HMRC's Brief outlines its interpretation of the impact of this judgment on the current UK VAT grouping rules.

Skandia was a company incorporated in the US supplying services to its fixed establishment (i.e. a branch) in Sweden, which was a member of a VAT group in Sweden.

The Swedish Tax Authority viewed the services provided by Skandia US to its Swedish branch as taxable transactions. However, Skandia disagreed on the grounds that the supplies were intra-company transactions and, consequently, not supplies for VAT purposes.

The ECJ held that as the VAT group was a separate taxable person from its constituent members, Skandia US should be treated as providing services to the Swedish VAT group. That is, the Swedish VAT group was obliged to account for VAT on the services under the reverse charge mechanism.

Under the UK's VAT grouping provisions, a company must have an establishment in the UK to join a UK VAT group. However, unlike in Sweden, the whole company is part of the VAT group, not just the fixed establishment (i.e. branch) in the UK. Consequently, services provided between an overseas establishment (i.e. head office) and a UK establishment (i.e. branch) of the company are not generally supplies for UK VAT purposes, since they are transactions within the same 'taxable person'.

HMRC's conclusion was that there are no changes required to the UK VAT grouping provisions, but changes will be required to UK VAT accounting and VAT may become due where an overseas establishment of a UK company is located in an EU Member State which operate similar VAT grouping to Sweden.

HMRC will confirm, as soon as possible, which other EU Member States operate the Swedish type of VAT grouping and update its guidance accordingly. The VAT accounting changes will apply to services performed on or after 1 January 2016.

Who is potentially affected?

  • Businesses that have intra-company supplies involving EU establishments.

How can VAT Services (Scotland) Ltd help you?

  • Assist businesses in reviewing their intra-company flows and determine the UK VAT accounting changes required to ensure readiness for the new application to services on or after 1 January 2016.

Contact us

Should you wish further information on the above, please do not hesitate to contact Gary using the details outlined below.


Gary Moore
Direct line 0141 636 9353
Mobile 07812 061 582
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