VAT divisional registration

Divisional registration lets a single company that runs its business through separate self accounting units register each unit for VAT under its own number and file its own returns. It is granted only at HMRC’s discretion, mainly where the company would have real difficulty filing one return on time, and the company remains a single taxable person liable for every division’s VAT. It is the right tool for one large company with autonomous divisions; a VAT group is the tool for combining several companies.

What is divisional registration?

Section 46(1) of the VAT Act 1994 provides that the registration of a body corporate carrying on a business in several divisions may, if it asks and HMRC see fit, be in the names of those divisions. HMRC’s VAT Groups Manual at VGROUPS09010 describes it as an administrative convenience allowing autonomous units with separate accounting arrangements to render their own returns and to pay and receive VAT separately.

Each division gets its own VAT registration number. That is different from a branch registration, which keeps the same VAT number followed by a four digit identifier. Crucially, VGROUPS09050 and VAT Notice 700/2, paragraph 9.8, say the divisions do not become separate taxable persons. The company as a whole remains legally responsible for the VAT debts and obligations of every division.

Who can register in divisions?

Only bodies corporate, under paragraph 9.3 of Notice 700/2. Sole traders and partnerships cannot use it; for them, the rule that one person has one registration covering all their businesses applies, as explained in our guide to one VAT registration for sole traders.

A company constituted outside the UK can apply if it has at least two self accounting units in the UK and meets the other conditions (paragraph 9.9). VGROUPS09600 adds that one UK division must take overall responsibility for the VAT debts and obligations of all the UK divisions and for any other UK supplies the overseas company makes.

What conditions does HMRC apply?

Divisional registration is not an automatic right. Paragraph 9.2 says HMRC will approve it only if satisfied there would be real difficulties in submitting a single VAT return for the company as a whole within 30 days of the end of the tax period, and VGROUPS09100 says this condition is applied strictly. Paragraph 9.5 and the manual pages that follow it add these requirements:

• Every division must be registered, including the head office and divisions trading below the registration threshold, so the registrations together cover all the company’s taxable activities (VGROUPS09200).
• Divisions must be distinct units with their own accounting systems. VGROUPS09250 says each must be distinguishable from the others by at least one of geographical location, the nature of the goods or services supplied, or type of activity such as manufacture, wholesale, retail or export.
• Each division keeps complete and independent accounts, especially for dealings with other divisions and jointly purchased items (VGROUPS09300).
• The company must be fully taxable, or treated as fully taxable because its exempt input tax is within the partial exemption de minimis limits, tested for the company as a whole. VGROUPS09400 states the limits as £625 a month on average and not more than half of all input tax.
• All divisions use the same tax periods. Monthly returns are possible if the company would mainly be in a repayment position, but then every division must file monthly (paragraph 9.14).

More on the de minimis test is in our guide to partial exemption de minimis limits.

How do you apply?

Paragraph 9.6 requires a VAT1 for each division, a letter explaining in detail why a single return is difficult, and evidence of incorporation. Divisional registrations cannot currently be made online; you phone HMRC for paper VAT1 forms. The letter must also confirm that the divisions will cover all the company’s taxable business activities (VGROUPS09650).

Approval normally takes effect from a current date, and the company keeps filing under its existing number until the new registrations are processed (VGROUPS09700). VGROUPS09750 says HMRC’s policy allows retrospective effect of up to 30 days before receipt of the application or the start of the current return period. The company may keep its original number for one of the divisions; moving activity between divisions of the same company is not a transfer of a going concern (VGROUPS09800).

How are dealings between divisions treated?

Because the divisions are parts of one legal person, supplies between them are outside the scope of VAT (VGROUPS09350). No VAT is charged and paragraph 9.13 of Notice 700/2 says you must not issue tax invoices between divisions. Internal recharges are an accounting matter only; see internal transfer pricing between divisions.

Penalties work division by division. Paragraph 5.11 of Notice 700/2 says each division is liable for its own late submission points and penalties, with its own maximum points total. But debts are not ring fenced: HMRC can pursue the company for any division’s unpaid VAT.

Is divisional registration better than a VAT group?

You cannot have both. Paragraph 1.4 says a company registered in divisions cannot have a division in a VAT group, and a group member cannot register some of its divisions outside the group. To move from one to the other, the company must first cancel all divisional registrations or leave the group (VGROUPS09150).

Point	Divisional registration	VAT group
Who it covers	One body corporate	Two or more eligible persons under common control
VAT numbers and returns	One per division	One number and one return for the group
Internal supplies	Outside the scope, as within one company	Disregarded under section 43(1)
Liability	The company for all divisions	All members jointly and severally
Exempt activity	Company must be fully taxable or within de minimis	Partial exemption applied to the group as a whole
Entry test	Real difficulty filing one return on time	Eligibility and control tests

Divisional registration suits a single fully taxable company whose divisions run separate ledgers, perhaps on different systems, and cannot realistically be consolidated into one return in time. A group suits businesses that operate through several companies and want to remove VAT on intra group charges or file once. Partly exempt businesses will usually find divisional registration unavailable. Our guide to VAT group registration covers the group rules.

What happens if the conditions stop being met?

Paragraph 9.12 says you must write to HMRC within 30 days of the change, and HMRC will decide whether the divisional registration can continue. If it is cancelled, a single registration must cover all the company’s taxable activity. VGROUPS09400 says that if exempt input tax goes over the de minimis limits, the company must tell HMRC immediately. HMRC will not deregister a division simply because its own turnover falls below the deregistration threshold, unless its activity moves to another division (VGROUPS09950). If the company becomes dormant, all divisional registrations are normally cancelled (VGROUPS09450).

There is no specific right of appeal against refusal, although VGROUPS09550 accepts that a tribunal might treat it as an appeal about registration under section 83(a).

Illustration only. A manufacturing company runs a retail chain on one accounting system and an export business from a separate site on another. Consolidating both into one return within the deadline is difficult, the company makes no exempt supplies, and both units keep independent accounts. It could apply for two divisional registrations, on the same return periods, with no VAT on stock transferred from the export division to the shops.

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Related Accountapedia entries

• VAT group registration
• Voluntary VAT registration
• The Trust Registration Service
• Can I charge VAT after registering late
• What happens if you register for VAT late

Sources

• legislation.gov.uk: Act 1994 c. 23, section 46
• GOV.UK: www.gov.uk
• GOV.UK: www.gov.uk
• GOV.UK: www.gov.uk
• GOV.UK: Group and divisional registration vat notice 7002
• GOV.UK: www.gov.uk
• GOV.UK: www.gov.uk
• GOV.UK: www.gov.uk
• GOV.UK: www.gov.uk
• GOV.UK: www.gov.uk

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.