The application of the TOGC rules has been in the spotlight recently, with several cases at the European Court dealing with various aspects of the rules and their consequences. The cases have considered issues as diverse as whether the rule has direct effect in Member States (Peckeger (Case T-413/25)), to what extent it can be applied to composite transactions (Szytelbiecka (Case T-366/25)) and, perhaps most interestingly, whether the grant of a lease to the purchaser of business assets can fall within the scope of the TOGC (A&P Deco NV (Case T-397/25)). The latter may, possibly, have implications for HMRC's approach to the application of the TOGC rules to a transfer of a letting business via the grant of a new intermediate lease.
In this edition, as well as looking at these TOGC cases, we also cover the following developments:
- HMRC's most recent published guidance on the application of the single/multiple supply rule to fund management services;
- HMRC's R&C Brief on recovery of input VAT by overseas group members;
- An FTT decision analysing tripartite arrangements for VAT purposes;
- A decision of the CJEU on the application of State aid rules to an illegal VAT exemption; and
- A decision of the General Court indicating that a requirement for 100% ownership to qualify for VAT grouping would be contrary to EU law.
In addition, we produce more detailed reports on the most significant tax developments so if you scroll to the bottom, there's a list of the most important issues we have covered, with links to our more detailed reports.
If you are interested in finding out more about the below or have a specific indirect tax query, please don't hesitate to get in touch.
Letting buildings as part of a TOGC
The ECJ has previously held in Schriever (Case C-444/10) that, if an economic activity requires premises, the transfer of the totality of assets necessary to carry on that business as a going concern can be achieved where the premises are made available by a lease. In A&P Deco (Case T-397/25), the taxpayer sold its garden centre business as a going concern. However, rather than selling the buildings, it entered into a VAT exempt lease in favour of the buyer. The buildings were within the capital goods scheme (as a result of earlier refurbishment) and the taxpayer sought to argue that its grant of an exempt lease over buildings was to be ignored as part of the TOGC, such that no CGS adjustment was required.
The General Court has rejected that argument. The need to adjust input VAT recovery in relation to CGS items was fundamental where there was a change from taxable to exempt use and, in any event, the grant of a new lease was not part of the assets transferred. Only assets that were previously part of the business could be transferred as part of the TOGC and that could not include a new lease.
Whilst the decision makes it clear that the grant of the lease itself is not part of the TOGC and may, as here, result in a need to adjust input VAT previously reclaimed under the CGS, it may raise questions over the decision in Robinson Family Ltd and HMRC's acceptance that the grant of a lease for a premium, retaining only a nominal reversion, was in substance a 'transfer' and a TOGC of a letting business. However, quite apart from the fact the decision is no longer binding in the UK, there are other reasons to distinguish the A&P Deco case from the situation in Robinson Family Ltd. Firstly, the lease in A&P Deco appears to have been a short, commercial lease, merely transferring use of the property, rather than any long-term ownership. Secondly, the business in Robinson Family Ltd was essentially the rental business deriving from the rights to rents etc under the underlying occupational leases and these rights (and that business) were effectively transferred by the grant of the intermediate lease.
Read our Insights article in full
TOGCs and composite transactions
Can the transfer of a business via an intermediate transfer to individuals of a share of the business who then intend to enter into a partnership to continue the business qualify as a TOGC? In Szytelbiecka (Case T-366/25), the Court has suggested that, on the facts, the intermediate transfers to the individuals could not be ignored and would prevent TOGC treatment. The Court noted that the individuals would only obtain a part interest in the business and a half share of the business did not constitute an autonomous unit of assets enabling each, on their own, to carry on an independent economic activity, irrespective of the intention to contribute that share to the partnership.
The Court applied a single/multiple supply analysis to determine that the transfers to each individual could not be treated as a single supply. On the facts, each individual would receive a half share of which they were sole owner and could dispose of without the other's consent, and the subsequent contribution to the partnership was not conditional on, or dependent on, the initial gift and would occur at a later date. The Court therefore found that the two transfers were not so closely linked as to form a single indivisible transaction.
It may be worth noting that the assumption in this case appears to have been that the partnership was a separate legal entity from the two individuals. Different jurisdictions may take different approaches to the status of partnerships and it may be that the transfer to the two individuals to carry on the business in partnership might automatically result in (essentially) the transfer of the business directly into partnership, avoiding the intermediate steps in this case.
Read our full Insights article here
Direct effect of TOGC provisions
In Peckeger (Case T-413/25), the General Court has confirmed that the TOGC provisions within the Principal VAT Directive have direct effect such that they can be relied upon directly by taxpayers in Member States. The Court considered that the provisions of Article 19 are sufficiently precise to have direct effect where the Member State in question (Austria in this case) has chosen to implement Article 19. Moreover, the Court has held that Member States are not entitled to restrict the application of the TOGC provisions to "contributions of certain business assets or parts of a business intended to generate certain kinds of income". The scope of the non-supply rule cannot be limited beyond the restrictions allowed in the second paragraph of Article 19 (relating to recipients not wholly subject to tax) as that would call into question the uniform determination of the basis of assessment.
The case itself concerned the transfer of rental properties by a taxable person (who had previously recovered input VAT in relation to those properties) to a company of which he was the sole shareholder (with no additional company shares issued for that contribution). The Court confirmed that in those circumstances there was no supply for consideration, but that there was a deemed supply pursuant to Article 16 of the Directive, since the transaction involved the transfer of business assets free of charge to the related company.
HMRC guidance on fund management
HMRC has published new guidance, through its Guidelines for Compliance (GfC20), on the recommended approach to assessing whether fund management services constitute single or multiple supplies for VAT purposes. The Guidance is aimed at businesses providing or receiving fund management services, including outsourced fund management services, and sets out HMRC's recommended approach to deciding whether such services are single or multiple supplies for UK VAT purposes.
The examples given in relation to NAV services appear useful: HMRC appears to accept that the same service (NAV calculation) delivered under a Master Services Agreement (MSA) can still be treated as multiple supplies where, by its nature, it produces a different output for each fund - for example, a different NAV reflecting each fund's distinct asset mix. A similar logic may arguably extend to other services that are nominally similar but produce a fund-specific output, such as fund accounting or investment management services that take into account the risk profile and other characteristics of the specific fund to which they relate.
HMRC has published this guidance as part of its broader Guidelines for Compliance series, which aims to go beyond interpreting the law and set out HMRC's view on its practical application (including best-practice examples), helping taxpayers understand HMRC's expectations. Following the guidelines should therefore also help mitigate exposure to penalties where errors are identified and corrected.
Read our full Insights article here
UK VAT refunds for non-UK businesses in a VAT group
HMRC has published R&C Brief 8/2026 on changes to VAT refund claims by non-UK members of VAT groups. Since 1 January 2021, all non-UK businesses that are members of a VAT group have had to submit claims for a refund of UK VAT through their representative member.
The Brief states that all non-UK businesses that are members of a VAT group must now submit their own claim for a refund of any UK VAT they incur. HMRC will no longer accept a claim made by the VAT group's representative member unless that member incurred the VAT. As a transitional measure, for the prescribed year from 1 July 2025 to 30 June 2026, HMRC will accept a claim from either the VAT group member that incurred the VAT or the representative member. The deadline for these claims is 31 December 2026. HMRC will also review claims for VAT incurred from 1 January 2021 which were refused because they were not submitted by the representative member, provided that the VAT was not included in a later representative-member claim. Requests for reconsideration must be made by 31 August 2027.
State aid and VAT exemption contrary to the Principal VAT Directive
The decision of the CJEU in Schoger (Case C-360/25) is not actually a VAT decision, but it is an interesting example of the application of State aid rules in the context of VAT. It appears that the Austrian VAT rules at the relevant time applied a VAT exemption to certain services provided between undertakings operating in the financial services sector, where those services were directly used to carry out exempt transactions. The taxpayer in this case relied on that exemption and a dispute arose with the Austrian tax authorities. This exemption was outside the scope of the exemptions in the Principal VAT Directive, but the domestic courts noted that the taxpayer was nevertheless, in principle, entitled to rely on it as part of the Austrian domestic VAT code. However, the court essentially referred questions to the CJEU asking whether such an exemption should be seen as illegal State aid.
The Court has held that the exemption is a domestic measure and conferred a selective advantage on a distinct and limited sector. As such, it qualified as illegal State aid and the Court rejected arguments that this was offset by the disadvantages of exemption (no input VAT recovery). The importance of the decision is that, whilst the exemption itself could not be disapplied (as the taxpayer's were in principle entitled to rely on the domestic VAT provisions even if they were contrary to the PVD), the State aid ruling would nevertheless require the Austrian government to recover the value of the unlawfully granted advantage from those taxpayers for all open periods.
100% ownership for VAT grouping contrary to EU law
The Danish VAT rules provide that a VAT group can only be formed between persons carrying out taxable activities and persons carrying out activities not subject to VAT registration where there is 100% ownership in place. The taxpayer in Sampension Livsforiskring (Case T-268/25), an insurance company, was registered as a VAT group with a management company it wholly owned. In 2017, 6% of the management company's shares were acquired by pension funds and it ceased to qualify for VAT grouping. The taxpayer later sought to re-establish VAT grouping, arguing that the requirement for a 100% ownership relationship for VAT grouping was contrary to EU law.
The General Court has, essentially, agreed with the taxpayer. A 100% ownership condition could not be justified as a requirement for VAT grouping members who are "closely bound to one another by financial links", unless it could be justified as a measure that are needed to prevent tax evasion or avoidance. That was a matter for the domestic courts to determine, although the General Court has suggested that such a measure is unlikely to be proportionate. However, the Court also went on to confirm that the provisions of Article 11 dealing with VAT grouping do not have direct effect as they are not sufficiently unconditional, depending on the member state to set out the necessary financial, economic and organisational links to qualify for VAT grouping. Of course, the national courts remain under a duty, as far as possible, to interpret national legislation in a manner consistent with EU law to ensure its effectiveness.
VAT and tripartite arrangements
The decision in Tapi Carpets Limited v HMRC [2026] UKFTT 1128 is another useful example of the application of the principles to apply in determining who is making a supply in the context of tripartite arrangements. In this case, Tapi provided a "fitting arrangement service" to customers buying flooring. The flooring was fitted by independent fitters who were paid directly by the customers. However, HMRC argued that Tapi supplied the flooring fitting service via the independent fitters and so should have accounted for VAT on the fitting fees customers paid directly to fitters.
The FTT found Tapi's terms plainly meant that, for the arrangement fee, Tapi agreed to source a suitable fitter on the customer's behalf, with the fitter then contracting directly with the customer on the day of fitting and taking responsibility for the fitting itself; customer-facing "we"/"us" language did not displace this, and features such as standard-form skill-and-care terms and complaint-handling were properly seen as part of the arrangement service Tapi was paid to provide as agent. HMRC's argument that fitters supplied their services to Tapi and Tapi then on-supplied them to the customer was rejected as it did not match the actual legal relationship between the parties. In addition, there was nothing artificial or uncommercial in the arrangements which represented a genuine agency relationship.
The analysis of all such tripartite arrangements is highly fact significant and this is highlighted by the fact that the comment by the FTT that: "we have found a comparison with those other cases to be of limited value, given that those cases generally do not set, extend or add to the relevant legal principles; they simply illustrate the application of those principles on the particular facts applicable to each case".
Spain: VAT and group recharges
The deductibility of VAT on recharged expenses between group entities was at the centre of a very recent Spanish Supreme Court judgment. The case involved an Economic Interest Grouping (AIE) which centralised certain costs, including hospitality expenses for clients of group member companies, and subsequently recharged these costs to those entities. The key issue was whether the recharging entity must obtain a profit or economic margin for the transaction for it to be considered "onerous", or whether it is sufficient that there is consideration and VAT is charged, even if the recharge is made strictly at cost.
The High Court of Justice of the Valencian Community had upheld a VAT assessment for 2019, finding that the operation lacked consideration or onerousness because the AIE was not profit-seeking and the recharged amounts merely matched the costs incurred. On that basis, it denied deductibility of input VAT.
It is particularly remarkable that in the course of the taxpayer's appeal, even the State Advocate accepted that the decision was incompatible with CJEU case law, notably Hotel Scandic Gåsabäck (C-412/03) and Lajvér Meliorációs Nonprofit Kft (C-263/15). Those judgments confirm that a transaction is "for consideration" for VAT purposes even where no profit is obtained, provided there is a legal relationship involving reciprocal obligations and genuine consideration. In line with this EU case law, the Supreme Court has now upheld the AIE.'s appeal. It held that the existence of consideration or onerousness for VAT purposes is not dependent on the recharging entity obtaining a profit or economic margin. Recharging costs at cost, in itself, does not preclude a transaction from being considered onerous and therefore from giving rise to deductible input VAT.
Other issues we have recently covered
Taxation of distributions: Simmons & Simmons consultation response
Simmons & Simmons response to HMRC's consultation on reforms to the taxation of distributions and repayments of capital from companies, published on 23 June 2026.
Securities Transfer Tax consultation: Simmons & Simmons response
Simmons & Simmons response to HMRC's technical consultation on the draft legislation for the new Securities Transfer Tax (STT), published on 13 July 2026 as part of the Finance Bill 2026-27 package.
Simplifying treaty relief from withholding tax: Simmons & Simmons response
Simmons & Simmons response to HMRC's consultation on Simplifying Treaty Relief from Withholding Tax on Interest Paid Overseas, published on 13 July 2026.
UAE issues new Top-up Tax guides and filing decision
The UAE Federal Tax Authority (FTA) and Ministry of Finance have, in August 2026, released three significant documents under the UAE Domestic Minimum Top-up Tax (DMTT) regime: the Scope and Registration Guide; the Excluded Entities and Investment Entities Guide; and Ministerial on the entities required to file the Pillar Two Information Return.
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