14 October 2025
UK Supreme Court confirms tax point deeming provisions determine whether supply occurred within VAT group for group disregard
Silverfleet Capital (Silverfleet) provided investment management services to Prudential Assurance Co Ltd (Prudential) while both were VAT group members. Under section 43 VATA 1994, intra-group supplies are disregarded for VAT purposes. However, success fees were invoiced later, after Silverfleet had left the group.
Prudential argued that VAT should not apply, as the services were rendered during group membership. HMRC contended that Regulation 90 of the VAT Regulations 1995, which governs the tax point for continuous supplies of services, meant the time of supply was when the invoice was issued or payment made—after group exit—and therefore VAT was due.
The First-tier Tribunal (FTT) initially ruled in favour of Prudential, but the Supreme Court, upholding the decisions of the Court of Appeal and the Upper Tribunal (UT), confirmed that time of supply rules apply—not the actual timing of service performance—to determine whether the supply occurred within the VAT group.
Accordingly, the continuous supply of services took place when the parties were no longer members of the same VAT group. The supply could not be disregarded under VAT grouping provisions and was therefore subject to VAT.
Key takeaway / recommendation
Businesses must carefully manage deferred or contingent payments within VAT groups, particularly where exempt entities are involved. The timing of invoicing or payment—not service performance—determines VAT liability. Contracts should be reviewed to mitigate VAT risks when suppliers or recipients exit VAT groups. In particular, care should be taken to ensure that payments are made or invoiced before the party leaves the VAT group where the recipient cannot recover all its VAT. This ruling is especially relevant for success fees, performance-based remuneration, and corporate reorganisations involving VAT group exits.