Reply To: What are the conditions for VAT Group registration?

Forum Categories GENERAL VAT DISCUSSIONS What are the conditions for VAT Group registration? Reply To: What are the conditions for VAT Group registration?


The main benefits of a VAT group are that one VAT return is completed for the whole group for each period, and intra-group charges are not subject to VAT. A potential disadvantage is that all members are jointly and severally liable for the VAT debts of the group. If one company defaults and cannot pay its dues, the profitable members must jointly pick-up the debt (HMRC Notice 700/2, para 2.1).

Two or more companies or limited liability partnerships – known as ‘bodies corporate’ – can register as a single taxable person or VAT group if:
each body has its principal or registered office in the UK.
they are under common control – for example, one or more company is a subsidiary of a parent company [ 51% shareholding and if Joint venture the shareholder should have casting vote.

HMRC have the right to refuse Group registration if abusive. However, if you’re not satisfied with our decision, you can appeal to an independent VAT tribunal. If you were registered for VAT before you applied for group treatment, your previous registration will be reinstated with effect from the date on which it was cancelled.

Registration: Apply, Body corporates, under common control and UK establishment
Lose individual identity, one representative member;51% =control [ if JV -casting vote]; single taxable person, Pure holdco on their own cant register for VAT but allowed in Group [EC raised an infringement of EU directive with CJEU. 2013, CJEU agreed with the UK treatment.
Following Larentia & Minerva case – possible to include non-corporates into the VAT group through the UKJ law is yet to confirm that. Upon condition of “close economic, financial and organisational link”

Advantages: single VAT return, individual entities lose identity hence can include exempt or pure holcos, may increase input vat; exclude interco transactions – admin, cashflows good.

Disadvantages: jointly and severally responsible- may not work with JVs After a VAT group, if you include exempt results in partial recovery, higher penalties – bigger nos, depended on other entities for timing of returns etc; if you include repayment entity lose monthly returns.

Member CGS leavers creates CGS interval and the remainder continue the CGS with 12m intervals

If Holdco is supplying staff consider other options – joint contact of employment & secondment (where subs pays direct).
Divisional registration – each division registers for VAT /separate returns but company liable