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Using VAT Groups

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Newsletter issue - December 2011.

Do you control several companies, or own one company, which in turn controls several other companies? You could save time, hassle, and VAT in some limited circumstances, by asking the Tax Office to treat all your companies as one VAT group. You then only have to complete one VAT return for the VAT group, instead of one return for each company, and pay one amount of VAT over to HMRC. Also the transactions between the companies that are within the VAT group are generally ignored for VAT purposes. There are exceptions for certain international services.

The companies within the VAT group don't have to carry on similar trades, they can operate in quite different business sectors. However, where some companies regularly receive VAT refunds and others pay VAT each quarter, it would not be sensible to put those payment and repayment companies together in one VAT group. Also, once the companies are together in one VAT group the limits for various VAT reliefs, such as cash accounting, error reporting, or partial exemption, apply to the turnover of the whole group.

An LLP can join a VAT group with a company, if both bodies are under common control. This can be useful where an LLP has been used in place of another associated company (an additional associated company may increase the corporation tax rate paid by the main trading company). A general partnership, which is not an LLP, cannot join in a VAT group under any circumstances.