Hurdle rate meaning

The Prudential Assurance Company Ltd v HMRC [2024] EWCA Civ 300 The Prudential Assurance Company Ltd (Prudential) acted as the representative member of its VAT group. Another company in the group, Silverfleet Capital Ltd (SCL), executed an investment management services contract to provide services to Prudential. Under that contract, SCL was also eligible for a management fee and deferred performance fees once a specified hurdle rate was achieved. Under section 43 of the Value Added Tax Act 1994 (VATA 1994), no VAT was payable on the management fee because they were in the same VAT group. In 2007, SCL exited the VAT group. In 2014 and 2015, the triggers for paying the further deferred performance fee were satisfied and SCL invoiced Prudential for over £9m in total. The question before the Court of Appeal was whether those additional performance fees ultimately constituted consideration for a supply made while both companies were members of the same VAT group or, alternatively, whether the services amounted to a continuous supply of services...

The Prudential Assurance Company Ltd v HMRC [2025] UKSC 34 On the facts, the supplier could levy success fees only once a hurdle rate had been achieved. That threshold was not reached until after the supplier had left the VAT group, so the supplier applied VAT. Prudential then lodged a non-statutory request with HMRC asking whether VAT ought to have been charged. HMRC concluded that it should, and Prudential appealed that conclusion to the First-tier Tax Tribunal. The dispute then moved on to the Upper Tribunal and, thereafter, the Court of Appeal. The questions before the Supreme Court concerned three lines of reasoning advanced to sustain Prudential’s contention that no VAT was due, and the counter-arguments relied upon by HMRC to maintain that VAT had been correctly charged. The strands of argument advanced for Prudential were as follows...