New Opportunities for VAT Grouping

The Government has recently announced that non-corporate entities, such as partnerships or individuals, will be able to join a VAT group along with the companies that they control.

Currently, VAT Grouping is available for two or more “bodies corporate” e.g. companies or limited liability partnerships – as long as each body has its principal or registered office in the UK and they are under common control.

Determining when “bodies corporate” are under common control can be difficult.  However, in general where a company is a subsidiary of a parent company or an individual owns 51% or more of each of the companies then the “body corporate” may be eligible for VAT Grouping.

VAT Grouping can be beneficial as supplies between the members of the group are disregarded for VAT purposes.

The VAT group registration is treated in the same way as a single taxable person registered for VAT on its own.

The registration is made in the name of the ‘representative member’, who is then responsible for completing and submitting a single VAT return and making VAT payments or receiving VAT refunds on behalf of the group.

There can be disadvantages in VAT Grouping – particularly as all the members of the group remain jointly and severally liable for any VAT debts.

The Government announced it would consult on VAT grouping in the 2016 Autumn Statement. A consultation document was duly published in December of that year and the Government’s response was published in December 2017

Draft legislation on the changes to the eligibility of VAT Grouping was published on 6 July 2018.

Julian Borley, Director of VAT at Milsted Langdon, said: “This announcement allows additional opportunities for businesses in respect of VAT Grouping.

“Businesses who wish to find out how they can benefit or who wish to explore the opportunities presented by VAT Grouping in general should seek specialist advice..”

For more information about how Milsted Langdon can help, please contact us.

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