On 7 July 2015, the Upper Tribunal (in Intelligent Managed Services Ltd v HMRC9) reversed the earlier First-tier Tribunal decision that a business transfer into an existing VAT group, where the transferee intended only to make supplies to other VAT group members, could not be a transfer of a going concern.

For commentary on the First-tier decision, see here for our earlier update.

The transferor provided electronic payment services to banking businesses. It agreed to transfer its business to a member (but not the representative member) of a VAT group. Although the transferee group as a whole made banking supplies to third parties (which supplies incorporated the transferred business), the actual transferee under the sale and purchaser agreement made supplies only to another VAT group member.

Following the recent European Court of Justice (ECJ) decision in the Skandia case, the Upper Tribunal held that supplies to VAT groups are treated as made to the group itself. In other words, the transferee of the business in this case was the VAT group and not the individual member.  The VAT group’s business was made up of the individual activities of all its group members. The VAT group was, therefore, carrying on the “same kind of business” as the transferor, for TOGC purposes. Simply because the UK’s VAT grouping rules deemed all such individual activities as carried on by the representative member did not change the character of those activities.

The decision can be found here.