VAT group membership could not be backdated

In Dollar Financial UK Ltd v HMRC [2023] UKUT 00256, the Upper Tribunal (UT) found that the First Tier Tribunal (FTT) was correct to strike out an appeal seeking to backdate membership of a VAT group. No valid application had been made and there was no appealable decision.

• In June 2013, Dollar Financial UK Ltd (DFUK) applied for its US parent company to join its VAT Group with immediate effect. HMRC approved the application.
• In 2016, DFUK asked for the admission of its parent to the VAT group to be backdated to July 2012, being the date that the US parent acquired a UK Permanent establishment and, therefore, the date that it should have Registered for VAT.
  • DFUK did not seek to separately register the US company for UK VAT.
• If the backdating request was allowed, it would have meant that DFUK should not have accounted for VAT of £2.2 million under the Reverse charge on Management services provided by the US company.
  • DFUK made a Repayment claim for this amount.
• HMRC rejected the request for VAT group backdating. This position was upheld on Statutory Review.
• DFUK appealed to the First Tier Tribunal (FTT), which struck out the appeal. DFUK Appealed to the Upper Tribunal (UT).

The UT found that:

• The FTT was correct to conclude that no valid application to backdate VAT grouping was made under s.43B VATA 1994, and no such application could validly have been made.
• Had there been a valid application, as HMRC did not refuse it within 90 days, the legislation would have deemed such an application to have been granted with effect from HMRC’s receipt of it in September 2016.
  • As the parent company was already a member of the VAT group in September 2016, a valid application would have had no legal effect.
• The decision given by HMRC related only to VAT grouping and was not a decision about the VAT registration of the US parent company.
  • The FTT was correct to find that it lacked jurisdiction: there was no right of appeal under s.83 VATA 1994.

The appeal was dismissed.

Useful guides on this topic

Groups (VAT)
What are the conditions for forming a VAT group? What rules apply once a VAT group is in place?

Reverse charge: Cross-border services
A UK business may be required to operate the reverse charge on services it receives from abroad.

Management re-charges (holding companies)
When are intercompany charges subject to VAT? What rate of VAT applies to an intercompany charge? Is an intercompany charge a supply for VAT? Is there VAT on an intercompany payment for group relief?

How to appeal an HMRC decision
Disagree with an HMRC decision? How do you appeal, what type of decision can you appeal and what are your different options when you disagree with HMRC? What are the key steps in making an appeal?

Correcting VAT errors
What are the VAT error correction time limits? Can you correct errors through the VAT return? Do you have to notify HMRC?

External link

Dollar Financial UK Ltd v HMRC [2023] UKUT 00256