VAT group membership cannot be backdated

In Dollar Financial UK Ltd v HMRC [2021] TC8199, the First Tier Tribunal (FTT) struck out an appeal regarding the backdating of VAT Group membership. The legislation did not provide for backdating and there was no HMRC decision to appeal so the tribunal did not have jurisdiction.

In June 2013 Dollar Financial UK Ltd (DFUK) had applied for its US parent company to join its VAT Group with immediate effect. HMRC approved the application.

• In 2016 DFUK asked for admission to the 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 mean 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 backdating which was upheld on Statutory Review. DFUK appealed.

The FTT struck out the appeal.

• The request by DFUK was not a valid VAT registration application; no form VAT 1 had been filed by the US company and DFUK could not apply for registration on its behalf.
• The comprehensive VAT grouping legislation at s.43B VATA 1994 provides for four types of application:
  • None of these relate to backdating admission to a VAT group.
  • An application can only be made in respect of a company that is outside the group at the date of the application which was not the case here.
  • The 2016 request by DFUK was therefore not a valid grouping application under s.43B.
• HMRC had not issued any decision letter on either point. As a result, there was no appealable decision for the FTT to determine, it had no jurisdiction and the appeal must be struck out.

Useful guides on this topic

Groups 
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.

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?

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 a HMRC decision? How to 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?

External link

Dollar Financial UK Ltd v HMRC [2021] TC8199