Intra-group services and time of supply

Silverfleet Capital Ltd provided Prudential with investment management services for its with-profits fund. They were both members of the same VAT group until a management buy-out in 2007 resulted in Silverfleet ceasing to be a member of the group.

Under agreements made before the buyout Silverfleet was entitled to charge performance fees if a benchmark rate was exceeded. This happened only after Silverfleet left the VAT group. The issue was whether the performance fees were subject to VAT – as decreed by HMRC.

The First-tier Tribunal allowed Prudential’s appeal but the Upper Tribunal overturned that decision. The taxpayer appealed.

Prudential said the performance fees were consideration for services Silverfleet carried out when it was a member of the same VAT group as Prudential – so no VAT was chargeable (VATA 1994 s 43). HMRC disagreed saying the services were a continuous supply of services under VAT Regulation...