Barclays Services Corporation & Anor v The Commissioners For HMRC

Eligibility under the UK VAT grouping rules is defined by reference to the whole body corporate. A conforming construction that limited membership to a UK establishment, or only to an overseas company’s UK activities, would contradict that fundamental feature and cross the boundary between interpretation and amendment. In assessing a fixed establishment under section 43A, relevant case law on place of supply and other contexts must inform the evaluation, but is not imported wholesale. Access to resources alone does not amount to control like ownership. On a protection-of-the-revenue refusal, the tribunal asks whether HMRC could reasonably have been satisfied that refusal was necessary, taking account of the application’s circumstances and the objectives of the UK regime. The Upper Tribunal did not determine the complete fixed-establishment test.

Barclays Services Corporation (BSC), a US company with a UK branch, applied to join the VAT group represented by Barclays Execution Services Ltd (BESL). HMRC refused the application, finding that BSC had no UK fixed establishment or, alternatively, that refusal was necessary to protect the revenue.

The First-tier Tribunal dismissed the taxpayers’ appeal on fixed establishment. It also held that HMRC could not reasonably have refused grouping for protection of the revenue if BSC had a fixed establishment, and that the UK rules could not be given a conforming construction imposing a territorial limit. The taxpayers appealed on fixed establishment; HMRC appealed on the other two issues. The Upper Tribunal considered whether the branch was a fixed establishment on the application date, whether HMRC’s alternative refusal was reasonably open, and whether the UK rules could be read consistently with the territorial limitation in Article 11 of the Principal VAT Directive.

1. The taxpayers’ appeal on fixed establishment was dismissed. The FTT had been entitled to find that, on 1 December 2017, BSC’s UK branch had no employees or other resources over which it had actual or comparable control. Ms Hadjikakou was then employed by BESL, and her later contract with BSC could not retrospectively create an employment relationship. Practical access to premises, a desk, a computer and a telephone did not establish control comparable to ownership (paras [93]-[110]).

2. A conforming construction of section 43A of the Value Added Tax Act 1994 could not impose the territorial limit identified in Danske Bank A/S, Danmark, Sverige Filial v Skatteverket Case C-812/19. Eligibility is framed by reference to each whole body corporate, and section 43 treats that body as the group member. Reading section 43A as applying only “to the extent” of a UK establishment would alter a fundamental feature of the regime and cross the boundary from interpretation to amendment. The FTT reached the right result on this issue, although its reliance on practical repercussions was not, by itself, the proper reason (paras [49]-[65]).

3. On the assumed test used by the FTT, comparable control means control like ownership. Immediate and constant access may be necessary, but is not sufficient: the resources must be available as if they were the branch’s own, with arrangements that cannot be ended at short notice. The FTT did not err by requiring evidence of such control (paras [89]-[110]).

4. The factual challenges were governed by the approach in Edwards v Bairstow [1956] AC 14 and Georgiou (trading as Marios Chippery) v Customs & Excise Commissioners [1996] STC 463. The appellants had to identify the challenged finding, show its significance, identify relevant evidence and demonstrate that the FTT was not entitled to make it. The Upper Tribunal rejected each challenge (paras [111]-[140]).

5. The Upper Tribunal did not decide the complete legal test for fixed establishment. Its obiter view was that the relevant place-of-supply case law and other cases must inform the evaluation under section 43A, but are not imported wholesale or ignored. It also considered the intending-trader analogy inapposite: the concepts of taxable person and fixed establishment differ, and there is no directly effective right to join a VAT group (paras [145]-[160]).

6. The protection-of-the-revenue issue was academic, but the Upper Tribunal held that the FTT’s conclusion was wrong. Under sections 43B(5)(c) and 84(4A), the question is whether HMRC could reasonably have been satisfied that refusal was necessary, considering the particular application and relevant factors. The branch’s skeletal resources and the additional one-off tax benefit sought by achieving grouping before the end of 2017 meant that HMRC could reasonably have refused the application (paras [161]-[176]).

1. Upper Tribunal (Tax and Chancery Chamber) — The taxpayers’ fixed-establishment appeal was dismissed. The FTT’s conclusion on the Danske Bank Issue was upheld, while its Protection of the Revenue conclusion was held wrong. [2026] UKUT 211 (TCC) .
2. First-tier Tribunal (Tax Chamber) — On 29 August 2024, the FTT dismissed the taxpayers’ appeal on fixed establishment. It also held that HMRC could not reasonably have refused the application for protection of the revenue if BSC had a fixed establishment, and that a conforming territorial construction was not possible. The decision citation is not stated in the judgment.