Our website uses cookies to enhance the visitor experience (what's a cookieCookies are small text files that are stored on your computer when you visit a website. They are mainly used as a way of improving the website functionalities or to provide more advanced statistical data.). Are you happy for us to use cookies during your visits?
Please note: continuing without making a choice equates to giving us your consent, which you can withdraw at any time via our cookies policy page.

VAT Partial Exemption Changes Following Le Credit Lyonnais

Newsletter issue - January 2016.

In Brief 22/15 HMRC confirm changes to the VAT Regulations 1995 to ensure that UK law is aligned with EU law following the decision of the European Court of Justice (ECJ) in the case Le Credit Lyonnais (C-388/11). The changes take effect from 1 January 2016.

In Le Credit Lyonnais, the ECJ found that the VAT Directive could not be interpreted so as to allow a company to take into account the turnover of its foreign branches when calculating how much input tax it can deduct in the member state where it has its principal establishment, using a 'single pot' calculation. It also found that a sector in a partial exemption method could not be based on a geographic location. To reflect that decision, the March 2015 Budget announced proposals to exclude supplies made by overseas branches from partial exemption methods. As a result of feedback on the subsequent consultation, HMRC have narrowed the scope of changes, which are now set out in Brief 22/15.

Brief 22/15 can be found at www.gov.uk/government/publications/revenue-and-customs-brief-22-2015-changes-to-vat-regulations-following-judgment-in-the-case-of-le-credit-lyonnais-c-38811/revenue-and-customs-brief-22-2015-changes-to-vat-regulations-following-judgment-in-the-case-of-le-credit-lyonnais-c-38811.