Draft Finance Bill changes to VAT groups: pros and cons

Existing VAT grouping rules

Currently the UK VAT grouping legislation (VATA 1994 ss 43–43D) allows two or more bodies corporate (including LLPs) to register as a VAT group if each body is established in the UK and they are under common control.

The effect of a VAT group is that its members account for VAT on a single VAT return; also intra-group supplies are disregarded for VAT purposes. Each member of the VAT group is jointly and severally liable for the VAT debts of the other members of the group.

VAT grouping provides administrative savings for businesses. Also for businesses that are partially exempt for VAT purposes grouping can create a financial advantage. This is because in the absence of the disregard of intra-group supplies such businesses would incur VAT on purchases...