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Vat Group Registration Rules Relaxed

VAT group registration rules were relaxed on 1 November 2019 allowing all business entities to join a VAT group and operate under a single VAT registration number. Previously only corporate entities (mainly companies and limited liability partnerships), were allowed to form a VAT group.

Sole traders, partnership and trusts are now eligible under certain circumstances to join a VAT group, providing that they meet all of the following conditions:

  • They are established, or have a fixed establishment in the UK;
  • They can demonstrate they control the UK corporate body or all the corporate bodies in the VAT group. This would usually mean the sole trader, partnership or trust holds 51% or more of share capital in the corporate entities in the VAT group;
  • They can demonstrate that they are carrying on a business making taxable supplies (and so are entitled to VAT registration in their own right).

A VAT group can be useful for individuals running a number of different businesses. The main benefits are that

1) A single VAT return is completed for the whole group for each period. This is particularly helpful if your accounting is centralised.
2) Transactions of products and services between the members of the VAT group are not subject to VAT.
3) There could be cashflow benefits from intra-group charges.
4) If purchase invoices are received in the wrong company name, potentially time can be saved spent rectifying mistakes.

A potential downside of a group is that all members are jointly and severally liable for the VAT liabilities of the group as a whole. If one company cannot pay its VAT liability, the other members of the group must pay VAT due on its behalf.

To find out more about the new rules or to find out more about setting up a VAT group, email, drop into our Kettering offices and make an appointment or contact CFW Accountants on 01536 713555 for an initial, informal discussion.

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