UK-based GPs with overseas offices could be hit with an increased tax bill as the UK tax authority, HMRC, looks to alter its policies following a ruling from the Court of Justice of the European Union.
In the September case, Skatteverket v Skandia America Corp, the European court determined that Skandia’s Swedish branch became “independent” of its overseas head office by joining a variable added tax (VAT) group. Consequently, services supplied by Skandia’s overseas head office were subject to a reverse VAT charge on the Swedish VAT group’s VAT returns.
An example of this in a private funds context could be an investor relations team based in Hong Kong working for a predominantly UK-based fund manager which has set up a VAT group in the UK.
Following the ruling HMRC announced that it is carefully considering the impact of the Skandia case and will provide a further update on its position in due course, although the timing of this is unknown.
Yet, tax experts expect the HMRC to update its rules in line with the EU court decision. “The fact remains that a change to UK VAT policy seems likely and, therefore, businesses should review their position now, so that they are prepared,” said Robert Facer, tax associate at accountancy firm Moore Stephens.