The UK operates VAT grouping rules which results in 2 or more entities having the same VAT number as long as certain conditions are met.
A VAT group is considered to be a single taxable person and therefore one member of the group is designated as the “representative member” for the group.
Recently, the Upper Tribunal ruled on a question which the Lower Tribunal had answered differently in two separate cases (Standard Chartered/Lloyds UKFTT 316 and MG Rover Group/BMW/Rover Company UKFTT 327). The question concerned which member of the VAT group had the right to make claims for repayments of VAT (i.e. where VAT might not have been recovered at the right time and hence a claim was subsequently made for it). The Upper Tribunal heard the cases together because the Lower Tribunal had answered in Standard Chartered/Lloyds that the representative member had the right. However, in MG Rover Group/BMW/Rover it was held that the VAT group company which was involved in the transaction in question could make the claim.
The Upper Tribunal concluded the Standard Chartered/Lloyds case had reached the correct decision and that only the representative member of the VAT Group could make the claim. This decision was based on the fact that the grouping arrangements are there to simplify VAT accounting and hence that follows that only one member of the group can make claims (otherwise the individual members would obtain rights available to individual taxpayers but with the benefit the grouping brings).
This is an important decision but the matter is likely to be appealed so may change. Parties either setting up VAT groups or who are currently in existing groups (in the UK and also elsewhere in the EU) should consider putting in place contractual arrangements to manage the position should a member of a VAT group leave but then some years later need to make a claim for VAT repayments in the period when it was part of the group. The Upper Tribunal suggested such contractual terms would be appropriate to manage the position and hence the application of this should be considered by all existing VAT groups and those intending to group.