1. HMRC definition of a VAT Group

The following information has been taken from HMRC’s guidance on Group and divisional registration (VAT Notice 7000/2), dated the 26th November 2019.

VAT group registration

VAT grouping is a facilitation measure by which 2 or more eligible persons can be treated as a single taxable person for VAT purposes. Eligible persons are bodies corporate, individuals, partnerships and Scottish partnerships, provided that certain conditions are satisfied (see section 2.2). Bodies corporate includes companies of all types (see section 10) and limited liability partnerships.

How group registration works

A group of eligible persons may apply to be treated as a single taxable person for VAT purposes. The registration is made in the name of the representative member, who is responsible for completing and rendering the single return on behalf of the group.

Whilst the representative member is responsible for paying the VAT or receiving any repayment due, all the eligible persons are jointly and severally liable for any VAT debts. Supplies between group members are normally disregarded for VAT (see section 7 for details of when supplies are not disregarded).

What are the essential features of group registration?

The representative member accounts for any tax due on supplies made by the group to third parties outside the group – this is particularly helpful if your accounting is centralised.

If a company which is a member of a VAT group wishes to register some of its divisions separately, it must first apply to leave the VAT group before it can apply for registration in the names of its divisions.

Conversely, a corporate body, which is registered in the names of its divisions and wishes to form a VAT group with other associated companies or to join an existing VAT group, must first apply to cancel the registration of all of its divisions.

Other features of group registration

• You will need to make sure that the representative member has all the necessary information to submit a VAT Return for the group by the due date.

• All members of the group are jointly and severally liable for the tax due from the representative member.

• The partial exemption de minimis limits apply to the group as a whole and not the members individually see Partial exemption (VAT Notice 706).

• Partially exempt groups can adopt practical or regulatory structures within the UK without incurring additional VAT costs – for example, setting up a service company that employs all staff, and operates the procurement, finance, human resources and other functions on behalf of all the companies in the VAT group.

• The limit for voluntary disclosures of errors on past returns also applies to the group as a whole see paragraph 5.10.

• The cash accounting limits apply to the group as a whole and not to the members individually.

• The payment on account limits will apply to the group as a whole and not to the members individually see paragraph 5.9.

• The general rules on the personal use of business assets apply equally to VAT group registrations. See VAT Guide (VAT Notice 700/2) for further information.

• If you have group members with fixed establishments in more than one location, that make supplies to other members of the VAT group, you may need to make a calculation in connection with section 43(2A) of the VAT Act 1994 see section 7.

• If you have establishments (for example branches or head offices) overseas then you will need to be aware of the Skandia judgment and how it impacts on intra-group supplies see section 8.

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