Key facts
- A VAT group treats multiple companies as one taxable person.
- Supplies between group members are disregarded for VAT purposes.
- One company (the representative member) files the group’s VAT Return.
- All members are jointly and severally liable for the group’s VAT debt.
How VAT Grouping Benefits Connected Businesses
A VAT group allows two or more corporate bodies under common control to register as a single entity for VAT purposes. One company (the representative member) accounts for VAT on behalf of the group.[2]
Who Can Form a VAT Group?
To form a group, all members must be:[1]
- Bodies corporate (limited companies, LLPs, etc.) — sole traders and partnerships cannot join
- Under common control (one controls the other, or both are controlled by the same person/company)
- Established or having a fixed establishment in the UK
Benefits of VAT Grouping
- No VAT on intra-group supplies — transactions between group members are outside the scope of VAT
- Cash flow advantage — one net payment to HMRC instead of multiple
- Administrative simplicity — one VAT Return for the whole group
- Reduced partial exemption impact — the group’s activities are combined
Risks and Drawbacks
- Joint and several liability — every member is liable for the group’s entire VAT debt
- HMRC anti-avoidance powers — HMRC can refuse grouping or add/remove members to prevent VAT avoidance[2]
- Complexity — joining and leaving the group requires HMRC notification
How to Apply
- Complete form VAT50 (application for group registration)
- Submit form VAT51 for each company joining the group
- HMRC processes the application and confirms the group registration
Note: Individual VAT registrations of member companies are cancelled when they join the group. They revert to individual registrations if they leave.
Frequently Asked Questions
What is a VAT group?
A VAT group allows two or more companies under common control to register as a single taxable person for VAT purposes. One company (the representative member) files a single VAT Return for the whole group.
Is VAT charged on transactions between VAT group members?
No. Supplies between VAT group members are disregarded for VAT purposes, meaning no VAT is charged on intra-group transactions.
Can sole traders or partnerships join a VAT group?
No. Only bodies corporate such as limited companies and LLPs can form or join a VAT group. Sole traders and partnerships are not eligible.
What is the main risk of joining a VAT group?
All members of a VAT group are jointly and severally liable for the entire group’s VAT debt. If one member cannot pay, HMRC can pursue any other member for the full amount.
Further Reading
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Sources
- VAT grouping — GOV.UK
- VAT Notice 700/2: group and divisional registration — GOV.UK
- VAT guide (VAT Notice 700) — GOV.UK