InIntelligent Managed Services v HMRC[2015] UKUT 341 (7 July 2015), the UT found that the transfer of a business to a company which was part of a group, and which was to make supplies internal to the group, could qualify as a TOGC.
The appeal related to HMRC’s decision that the transfer of Intelligent’s (IMS’s) banking support services business to Virgin Money (VM), a member of Virgin Money Group (VMG) VAT group, was not a ‘transfer of a going concern’ (TOGC).
Because VMG was a VAT group, it was treated as carrying on the VM business as part of its overall business of the provision of retail banking services, so that the banking engine services provided internally by VM to the group were incorporated into the broader retail banking services supplied by VMG to its customers. The question was whether this fiction, created by the VAT group rules, meant that VMG was not to be treated as using the assets transferred in carrying on the same kind of business as IMS.
The UT noted that it was necessary to have regard to all the circumstances in determining whether the transaction had been a mere transfer of assets, or a transfer of an undertaking which could carry on an independent economic activity. The UT held that the activities of VM contributed directly to the economic activity of the group as a whole; and that it would be wrong in principle to seek to identify the nature of the group’s activity as a whole by reference solely to the external supplies it made. The fiction of the VAT group did not extend to treating the group as carrying on a different, amalgamated business, in which the separate businesses of the group lost their individual identity.
Why it matters: The FTT had found that there could not be a TOGC where the transferee was to be part of a VAT group and was to only make supplies to members of that group. The UT has now confirmed that the VAT fiction of a business carried out by a group does not extend to ignoring the fact that each group company carries on a separate business. It remains to be seen whether the decision will be appealed.
InIntelligent Managed Services v HMRC[2015] UKUT 341 (7 July 2015), the UT found that the transfer of a business to a company which was part of a group, and which was to make supplies internal to the group, could qualify as a TOGC.
The appeal related to HMRC’s decision that the transfer of Intelligent’s (IMS’s) banking support services business to Virgin Money (VM), a member of Virgin Money Group (VMG) VAT group, was not a ‘transfer of a going concern’ (TOGC).
Because VMG was a VAT group, it was treated as carrying on the VM business as part of its overall business of the provision of retail banking services, so that the banking engine services provided internally by VM to the group were incorporated into the broader retail banking services supplied by VMG to its customers. The question was whether this fiction, created by the VAT group rules, meant that VMG was not to be treated as using the assets transferred in carrying on the same kind of business as IMS.
The UT noted that it was necessary to have regard to all the circumstances in determining whether the transaction had been a mere transfer of assets, or a transfer of an undertaking which could carry on an independent economic activity. The UT held that the activities of VM contributed directly to the economic activity of the group as a whole; and that it would be wrong in principle to seek to identify the nature of the group’s activity as a whole by reference solely to the external supplies it made. The fiction of the VAT group did not extend to treating the group as carrying on a different, amalgamated business, in which the separate businesses of the group lost their individual identity.
Why it matters: The FTT had found that there could not be a TOGC where the transferee was to be part of a VAT group and was to only make supplies to members of that group. The UT has now confirmed that the VAT fiction of a business carried out by a group does not extend to ignoring the fact that each group company carries on a separate business. It remains to be seen whether the decision will be appealed.
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