20 November 2018 Andrea Marshall, Tax Specialist
You may be aware of the pending legislation regarding VAT grouping eligibility, but in addition, the recent Budget announcement made reference to changes in HMRC guidance regarding 'bought in' services by an overseas branch that itself is a member of a UK VAT group. As matters stand, there is a requirement to adopt a reverse charge on such 'bought in' services that are directly used by other UK members of a VAT group of which the overseas branch is part. EY has offered thoughts on what these HMRC policy changes might amount to in light of observations and discussions with wider sectors.
EY suspects there may be a desire to consider drawing central bought-in overhead costs of the branch within the charge if for example they are an indirect cost component of the intra group supply. As matters stand, such central overhead costs of the branch are excluded from the calculation of the charge. HMRC may also look to remove the 'trifling or insignificant' (5%) de minimis test in determining the extent to which 'bought in' services directly used in the UK can be ignored.
Whilst we await the formal guidance, it might be prudent for a university to review the impact of the above factors on its existing or pending branch modelling. If you think you may be affected, then this offers good time to amend processes and structure pending any changes coming into effect.