In Gala Leisure v HMRC [2015] UKFTT 516 (14 July 2015), the FTT found that the right to repayment of VAT stayed with the group, regardless of the departure of the company whose supplies had generated the claim.
VAT had been overpaid by a VAT group and the company whose trading activities had given rise to the overdeclaration of output tax (the ‘generating member’) had ceased to be a member of the VAT group. The relevant VAT had been accounted for by the representative member of the group and the generating member had transferred the relevant amounts to the representative member. The issue was whether the generating member was entitled to make a claim for repayment under VATA 1994 s 80.
The FTT accepted the statement in Standard Chartered [2014] UKFTT 316 that ‘in relation to supplies made by members of the group during the currency of their group membership (which are treated as made by the representative member, representing or embodying the single taxable person), the representative member will have all the relevant obligations under the legislation. The representative member will likewise acquire all the relevant rights under the law.' The FTT therefore rejected the submission that the fiction ended on a generating member leaving the relevant VAT group. It also refused the notion that the generating company would have borne the burden of the tax, as the group could have made any arrangements to fund the payment; and it noted that this was, in any case, irrelevant. The generating member had therefore no right to bring a claim.
Why it matters: The FTT stressed that ‘when a company leaves a VAT group, it does not retrospectively affect the economic reality of the intra-group relationships that existed throughout its membership’. This was the fundamental reason why a claim for repayment stayed with the group, even though it related to the trading activities of a company which had left the group. In so finding, the FTT vigorously rejected the reasoning of Rover [2014] UKFTT 327.
In Gala Leisure v HMRC [2015] UKFTT 516 (14 July 2015), the FTT found that the right to repayment of VAT stayed with the group, regardless of the departure of the company whose supplies had generated the claim.
VAT had been overpaid by a VAT group and the company whose trading activities had given rise to the overdeclaration of output tax (the ‘generating member’) had ceased to be a member of the VAT group. The relevant VAT had been accounted for by the representative member of the group and the generating member had transferred the relevant amounts to the representative member. The issue was whether the generating member was entitled to make a claim for repayment under VATA 1994 s 80.
The FTT accepted the statement in Standard Chartered [2014] UKFTT 316 that ‘in relation to supplies made by members of the group during the currency of their group membership (which are treated as made by the representative member, representing or embodying the single taxable person), the representative member will have all the relevant obligations under the legislation. The representative member will likewise acquire all the relevant rights under the law.' The FTT therefore rejected the submission that the fiction ended on a generating member leaving the relevant VAT group. It also refused the notion that the generating company would have borne the burden of the tax, as the group could have made any arrangements to fund the payment; and it noted that this was, in any case, irrelevant. The generating member had therefore no right to bring a claim.
Why it matters: The FTT stressed that ‘when a company leaves a VAT group, it does not retrospectively affect the economic reality of the intra-group relationships that existed throughout its membership’. This was the fundamental reason why a claim for repayment stayed with the group, even though it related to the trading activities of a company which had left the group. In so finding, the FTT vigorously rejected the reasoning of Rover [2014] UKFTT 327.
