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The Supreme Court has today given its judgment in The Prudential Assurance Company Ltd v HMRC [2025] UKSC 34.
Monckton member Peter Mantle was the sole advocate on behalf of HMRC, who were successful.
The appeal, brought by Prudential, concerned the relationship between the VAT grouping provisions (s 43 VATA 1994) and the VAT time of supply rules (‘TOSR’).
The Supreme Court upheld the Court of Appeal’s reasoning, essentially that the VAT TOSR had to be applied to determine whether a supply had to be disregarded for VAT purposes by reason of s 43(1) VATA 1994. It was the time of supply ascertained in accordance with the TOSR which dictated whether or not a supply had taken place when the supplier and recipient were members of the same VAT Group, not the date of actual performance of the services.
The Supreme Court decided that the ratio of the Court of Appeal in BJ Rice must be confined to its own facts.
The Supreme Court then rejected new arguments based on EU law by Prudential, not argued below. The dispute related to whether VAT was chargeable in respect of success fees due to the supplier under the relevant investment fund management services agreement which had been paid after the supplier had left the VAT Group, but where the actual performance of the relevant services had ended when it had left the VAT Group. The Supreme Court held that the wording of Regulation 90 of the 1995 VAT Regulations, on continuous supplies, applied to the facts. Regulation 90 was not just a permissible implementation of article 66 PVD. In this case, on the proper interpretation of article 64(1) PVD, the success fees were “successive payments” within the scope of that article The CJEU’s jurisprudence has not limited the application of article 64(1) PVD so that it only applies where the payment is made at a moment when the performance of the services is ongoing. That article also applies where the contractual consideration comprises an element which is uncertain or contingent at the time when the performance of the services is completed and where the “successive payment” comprises that element of the consideration. Thus in the relevant circumstances Regulation 90 is compatible with article 64 and changes not only the time at which VAT becomes chargeable but also the chargeable event. HMRC are not required to treat the success fees as, in effect, a gratuitous payment because the parties were within the same VAT group at the time the services were performed. The supplier was therefore correct to add VAT to its invoices for success fees earned several years after it had completed its performance of its services to Prudential. Prudential’s appeal was dismissed.
Peter Mantle acted for HMRC, instructed by HMRC Legal Group (Salford)