Upper Tribunal Judgment

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GRT100456
Summary
This is the first case that has
tested the 'carrying on the same
kind of business' condition in the
context of a transfer of a
business to a VAT Group.
The VAT group rules create a
fiction in that it is the VAT group
itself that is regarded as carrying
on the business of its constituent
members. HMRC took the view
that as the banking platform
services were not supplied to
third party businesses, that
somehow meant that the group
did not 'carry on' that business.
The Upper Tribunal thought
differently and allowed the
taxpayer's appeal.
14 July 2015
Transfer of a going concern (TOGC)
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.
Intelligent Managed Services Ltd
Case Alert
Contact
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