UK and International Tax news

Supreme Court Hears Appeal on Time of Supply Rules and VAT Groups

Tuesday 21st October 2025

The Supreme Court has recently heard an appeal concerning the relationship between rules applying to VAT groups and the provisions that deal with the time at which certain supplies of services are to be treated as supplied for VAT purposes.

S.43 VATA 1994 sets out that any supply by one member of a VAT group to another is to be “disregarded” and that “any business carried on by a member of the group shall be treated as carried on by the representative member”. The question in the appeal was whether no VAT was chargeable on an intra-group supply regardless of whether the supplier had left the group by the time consideration for the supply was the subject of a VAT invoice and paid.

In The Prudential Assurance Company Ltd v HMRC [2025 UKSC34], Silverfleet Capital Ltd (“SCL”) supplied investment fund management services to the Prudential when they were both members of the same VAT group. There was no dispute that at the time the services were actually performed and when Prudential paid the quarterly management fees contractually due to SCL, the supplies were treated as having been made by Prudential (as the representative member of the group) and disregarded [outside the scope] for VAT purposes.

Some years after SCL had stopped managing the funds for Prudential and left the VAT group, when the value of the funds exceeded a threshold fixed in the services supply contract, a success fee was triggered. The issue raised by the appeal was whether in these circumstances VAT was payable on the success fee because at the time SCL invoiced Prudential for the success fee they were no longer in the same group or whether because the fee arose out of the services that were all performed whilst they were in the group, it was not subject to VAT.

The SC considered the application of s.43(1)(a) VATA 1994, reg 90 VAT Regs [SI 1995/2518], as well as the PVD and relevant CJEU decisions.

The SC held that SCL was correct to add VAT to its invoices for the success fees earned several years after it had completed its performance of the investment fund management services to Prudential.

In particular, the SC held that regulation 90 applied to determine when the supply of those services took place for the purposes of applying the VAT Group Disregard in s.43(1)(a). Applying regulation 90, the consideration payable for those services was determined “from time to time” so that those services were treated as separately and successively supplied at the time that invoices for the success fees were issued. As SCL and Prudential were no longer in the same VAT group, the supplies did not fall to be disregarded.

The SC held that regulation 90 did not go further than was permitted by the relevant provisions of the PVD. Applying Article 64(1) of the PVD, the supply of services gave rise to a successive payment, namely the success fees, so that the services must be regarded as being completed on expiry of the period to which the payment relates by which time SCL had left the VAT group.

 

The implications of this decision should be considered in cases where a company leaves a VAT group, for example in restructurings, disposals, MBOs and where performance fees or other payments are deferred until after exit.

If you would like more information on the above, please contact Keith Rushen on 0207 486 2378.

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