In Lloyds Banking Group v HMRC [2017] UKFTT 835 (22 November 2017) the FTT found that payments made to a service company for the purpose of making redundancy payments to former employees were not subject to VAT.
Bank of Scotland (BOS) had a subsidiary which carried on a banking business in Ireland (BOSI). In early 2010 it was decided to close the retail and intermediary business in Ireland. In order to retain ‘local administrative capability historic knowledge and continuity of customer relationships’ BOS entered into an agreement with an independent service company Certus which would carry out administrative functions relating to the BOSI banking business using its former employees.
The issue was the VAT treatment of payments in respect of redundancy costs (‘redundancy payments’) made by BOS to Certus. HMRC contended that these payments were additional consideration for the services provided by Certus;...
