Jurisdiction(s):
United Kingdom

Court of Appeal: Regulation 90 time of supply for continuous services prevails over VAT group disregard; deferred fees taxable post-exit; B J Rice not binding (Prudential v HMRC)

Published on: 04 April 2024

Published by a LexisNexis Tax expert

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Article summary

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 for the purposes of regulation 90(1) of the Value Added Tax Regulations 1995 (the VAT Regulations), SI 1995/2518. Regulation 90 states that, where there is a continuous supply of services...

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