On 30 October 2015, HMRC published guidance (Business Brief 18/15) confirming the UK VAT changes resulting from the Skandia2 judgment and providing details of how it expects other member states to operate VAT grouping (if they have it).

From 1 January 2016, an overseas establishment of a UK-established entity will be treated as part of a separate taxable person if the overseas establishment is VAT grouped in a

Member State that operates similar “establishment only” grouping provisions to those in Sweden, which were considered in Skandia. This will be the case whether or not the entity in the UK is part of a VAT group. Therefore, businesses must treat intra-entity services provided to or by such overseas establishments as supplies made to or by another taxable person and account for VAT accordingly.

HMRC currently expects the changes to apply to Belgium, the Czech Republic, Denmark, Estonia, Hungary, Latvia, Slovakia, Spain and Sweden. The position in Cyprus, Finland, Germany and the Netherlands remains unclear. The remaining Member States are either not expected to apply the “establishment only” VAT grouping or do not have VAT grouping at all.

HMRC’s Brief is of course only a guide and businesses should check with the relevant Member State tax authority to confirm the situation in that Member State.

Brief 18/15 is available to view here.