Summary
This case concerned the VAT treatment of payments in respect of redundancy costs (‘redundancy payments’) made by Bank of Scotland (BOS) (a member of the Lloyds Banking Group (LBG) VAT group), following the closure of its business in Ireland and the transfer of the winding-down operation and its employees to an Irish company, Certus.
Background
HMRC’s case was that the redundancy payments made by BOS to Certus were additional consideration for the services provided by Certus and that BOS ought to have accounted for VAT on those payments under the reverse charge provisions. HMRC raised two assessments for underdeclared VAT, in the sum of £17,025 and £5,623,000.
LBG’s case was that although the redundancy payments were made under the service agreements with Certus, the obligation to make them derived from negotiations
