Chapter 21 - Groups

Question 1

Introduction

Answer 1

A group of companies is permitted to apply to HMRC to form a VAT group. The group is treated as a single company registered for VAT

Question 2

Conditions

Answer 2

Two or more ‘bodies corporate’ are eligible to be treated as members of a group if:
a) one of them ‘controls’ each of the others; or
b) one person (company or individual) controls them all; or
c) two or more individuals carrying on a business partnership control all of them
And each of the bodies is UK incorporated or has a UK PE

Question 3

Application for Group Registration

Answer 3

Free choice of which eligible companies are chosen to be in the group reg.
Application to form or alter a group reg is usually accepted on the day it’s made, or at a different date if agreed.
HMRC do have the power to refuse the application within 90 days of it being made

Question 4

Impact of a Group Registration

Answer 4

Group is treated as one taxable person. One co calls itself the representative member, and they are responsible for all VAT accounting and returns.
All co’s in the group are jointly and severally responsible for any VAT due.
Any supplies made between members of the group are disregarded.

Question 5

Advantages of Group Registration

Answer 5

Simpler VAT accounting, only one return for the whole group
Centralises VAT affairs
Supplies between group members are disregarded
Can include exempt companies in groups, and the group becomes partially exempt

Question 6

Disadvantages of Group Registration

Answer 6

If an exempt co is included, the group is partially exempt and restricts input tax recovery
Difficult to obtain information to do one group VAT return
If one company becomes insolvent, the other co’s are jointly and severally responsible for outstanding VAT
Any cash accounting, annual accounting, error corrections etc apply to the whole group
If late, larger degault surchargre as it’s a % of the group’s late VAT