FA 1997 introduced anti-avoidance provisions1 in relation to VAT groups. The provisions, which are described in this paragraph, are aimed at a scheme that enabled a partly exempt business to avoid a VAT charge in connection with certain services by routing those services through an overseas group member.
Example
X Ltd is a member of a partly exempt VAT group. It wishes to obtain the services of B, a UK firm of consultants, without incurring the VAT charge which would normally be associated with such a supply (since the majority of such VAT would not be recoverable by the VAT group).
X Ltd arranges for B to supply its services to Y Ltd, a member of the same VAT group as X Ltd. Although Y Ltd is established in the UK, therefore enabling it to be a member of the VAT group2, the services are supplied to its offices in Bermuda, and are therefore outside the scope of UK VAT3. Y Ltd then resupplies the services to X Ltd. This supply
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