VAT grouping changes improve business flexibility

Mon 29 Oct 2018

VAT grouping rules will change

One of the main advantages of a VAT group is the ability to disregard supplies between the VAT group members for VAT purposes.

Currently, only corporate bodies can been members of a VAT group. But with effect from Royal Assent the eligibility to join a VAT group will be extended to certain non-corporate entities.

Specifically the change will allow a non-corporate entity (e.g. a partnership or LLP), or an individual, to be a member of a VAT group with all the corporate entities that the entity or individual controls.

This measure will take effect after royal assent to the 2019 Finance Act by means of a statutory instrument.

Revised HMRC guidance

In addition to the above, revised VAT grouping guidance will be issued on the following:

1. In order to put an end to the abuse companies purchasing services through an overseas branch to avoid irrecoverable the revised guidance will include amending the definition of bought in services. Such services when bought are subject to UK VAT.
2. Clarity will be provided on HMRC’s protection of revenue powers and the treatment of UK fixed establishments.

These guidance changes will become effective from 1 April 2019.

Extending the VAT group eligibility to non-corporate entities could result in a significant savings in form of time and money for relevant businesses.