In HMRC v The Prudential Assurance Company Limited [2023] UKUT 54, the Upper Tribunal allowed an appeal by HMRC against a decision that no VAT was due on services provided whilst the parties were members of a VAT group that were not invoiced or paid until after the supplier left the group.

Prudential was the representative member of a VAT group that included Silverfleet Capital Ltd.

  • Silverfleet had been providing fund management services to one of Prudential’s funds and was entitled to a performance-related fee.
  • In 2007, Silverfleet Capital Ltd left the Prudential VAT group after a management buy-out. No management services were delivered after this point.
  • In 2014 and 2015, the benchmarks for performance fees were finally met, triggering performance payments of £9 million.
  • The question was whether VAT was due on a continuous service where the delivery of that service took place during the period when the entities were part of a VAT group, but where invoices were issued and payments made after the supplier had left the group.
  • HMRC said there was a Continuous supply of services and VAT had to be charged on the performance fee when it was invoiced and paid. 
  • Prudential Appealed arguing that services were only supplied when the two companies were part of the same VAT group, the group disregard applied, and the fees were outside the scope of VAT.

The First Tier Tribunal (FTT) ruled that no VAT was due on intra-group services supplied within a group where invoices were not issued until after the supplier left the group.

  • There was no continuous supply of services. The continuous service supply rules could not overrule the fact that Silverfleet had only ever supplied investment management services while it was in the VAT group, and they could not lift the services out of the VAT group and attribute them to services outside the VAT group.

The Upper Tribunal allowed HMRC’s appeal finding that:

  • There was a continuous supply of services meaning regulation 90 of the VAT Regulations 1995 applied and the time of supply was earlier than the time of payment or the time the supplier issued a VAT invoice.
  • Therefore the supply here took place when the services were invoiced, not when they were provided, which was after Silverfleet had left the VAT group.
  • The FTT had made material errors of law. The facts were clear therefore the decision was set aside with no need for remittance to the FTT. VAT was chargeable on the services.

Useful guides on this topic

Groups (VAT)
VAT grouping allows two or more 'bodies corporate' to be treated as a single person for VAT.

Time of supply (Tax point)
The time of supply of goods or services determines the date on which VAT becomes due. There are a number of different rules which must be considered including whether there is a continuous supply of services.

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?

External link

HMRC v The Prudential Assurance Company Limited [2023] UKUT54


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