In the case of Barclays Services Corporation & Anor v HMRC [2026] UKUT 211 (TCC) , the UT has dismissed the Appellants’ appeal against the FTT’s decision that HMRC were correct to refuse admission of the First Appellant to the VAT group, of which the Second Appellant was the representative member (see the Claritax News story).
VALUE ADDED TAX – VAT grouping – HMRC decision to refuse admission of First Appellant to VAT group – whether First Appellant had a fixed establishment in the UK at date of application for grouping – whether decision to refuse grouping on alternative ground of being necessary for the protection of the revenue was reasonable – whether a conforming construction of the UK VAT grouping rules to restrict their territorial ambit is possible
The UT summarised the background as follows:
“The Second Appellant, Barclays Execution Services Ltd (‘BESL’) is the representative member of a VAT group within the Barclays corporate group. On 1 December 2017, BESL applied to the Respondents (‘HMRC’) for the First Appellant, Barclays Services Corporation (‘BSC’), to join the VAT group (the ‘Application’). BSC is a Delaware corporation with limited liability which is also part of the Barclays corporate group and which operates primarily in the United States and has a branch in the UK.
HMRC rejected the Application on two alternative grounds:
(1) BSC was not eligible to be treated as a member of the VAT group because, for the purpose of section 43A(1) of the Value Added Tax Act 1994 (‘VATA’), it was not established, nor did it have a fixed establishment, in the UK; or
(2) Alternatively, if BSC did have a fixed establishment in the UK, it was nevertheless necessary to refuse the Application for the protection of the revenue, within the meaning of section 43B(5)(c) VATA.”
The UT summarised the FTT’s conclusions and the appeals before the UT as follows:
“The FTT held that BSC did not have a fixed establishment in the UK as at 1 December 2017. BSC and BESL appeal against that decision (the ‘Fixed Establishment Issue’).
The FTT also held that if BSC had had such a fixed establishment, HMRC could not reasonably have been satisfied that the Application should be refused as necessary for the protection of the revenue (‘POR’). HMRC appeal against that decision (the ‘Protection of the Revenue Issue’).
The FTT was also asked by HMRC to determine whether the relevant statutory provisions in VATA could be construed so as to contain a territorial limitation, in conformity with the decision of the CJEU … in Danske Bank A/S, Danmark, Sverige Filial v Skatteverket (Case C-812/19) [2021] STC 68 (‘Danske Bank‘). The FTT decided that they could not. HMRC appeal against that decision (the ‘Danske Bank Issue’).”
The UT addressed the Danske Bank Issue first because ‘if we were to decide that a conforming interpretation of the UK VAT grouping rules in order to impose a territorial ambit was possible, that would clearly have significant repercussions for the resolution of the other two issues’. The UT judged that:
“a conforming construction would be impermissible … it would clearly be contrary to the underlying thrust of the legislation and its fundamental features.
So, albeit for different reasons to those given by the FTT, we conclude that section 43A cannot be construed in conformity with Article 11 in order to impose a territorial restriction in line with Danske Bank.
The remaining issues in the appeal are determined in light of this conclusion. … “
Considering the Fixed Establishment Issue, the FTT dismissed all of the Appellants’ grounds of appeal.
Turning to the Protection of the Revenue Issue, the UT noted that “In view of our decision to dismiss the Appellants’ appeal on the Fixed Establishment Issue, this issue is academic. Nevertheless, since we heard argument on it, we will give our view on the FTT’s indicative decision.” Considering the matter, the UT concluded that:
“As we have explained, on an appeal against refusal of an application under the POR provision, the question for the Tribunal under the legislation is whether HMRC ‘could’ reasonably have decided to refuse the application under the POR provision, not whether it had reasonably done so in the given case. In all the circumstances in this appeal, including the two aspects we have highlighted, we consider that HMRC could reasonably have reached that decision.
Therefore, in disagreement with the FTT, if it had been necessary for us to decide this issue, we would have reached a contrary conclusion to that reached by the FTT.”
Overall, the FTT concluded that:
“The Appellants’ appeal on the Fixed Establishment Issue is dismissed. The FTT reached the correct conclusion on the Danske Bank Issue, but reached the wrong conclusion on the Protection of the Revenue Issue.”
https://caselaw.nationalarchives.gov.uk/ukut/tcc/2026/211
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