A VAT group lets two or more eligible UK bodies under common control register as a single taxable person with one VAT number and one return, submitted by a representative member. Supplies between members are normally ignored for VAT, but every member is jointly and severally liable for all the group’s VAT, including debts that arise while it is a member.

What does VAT grouping change?

Section 43(1) of the VAT Act 1994 provides that, where persons are treated as members of a group, any business carried on by a member is treated as carried on by the representative member. Supplies between members are disregarded, supplies by or to a member from outside the group are treated as made by or to the representative member, and import VAT paid by any member is treated as paid by the representative member. The same subsection makes all members jointly and severally liable for VAT due from the representative member.

VAT Notice 700/2, section 2, sets out the practical effects. Existing VAT numbers of members are cancelled and the group gets a new number, which stays the same even if membership or the representative member changes. One return covers the whole group. Thresholds and limits apply to the group as a whole, including the partial exemption de minimis limits, the error correction limit, the cash accounting limits and the payments on account threshold. Grouping is a facilitation measure, not a requirement, and is separate from corporation tax group relief, which uses different tests.

Who can be in a VAT group?

Under section 43A, two or more UK bodies corporate are eligible if one controls each of the others, one person (a company or an individual) controls all of them, or two or more individuals in partnership control all of them. A UK body corporate is one established, or with a fixed establishment, in the UK. Bodies corporate include companies of all types and limited liability partnerships (Notice 700/2, paragraph 1.2).

Since 1 November 2019, section 43A(4) and (5) also allow an individual or a partnership to join, if it controls all the UK bodies corporate in the group, carries on a business and is established or has a fixed establishment in the UK in relation to it. Other limits: a person can be in only one VAT group at a time (since 22 July 2004), a non established taxable person cannot join, and a company registered in divisions cannot also be in a group.

How does the control test work?

Notice 700/2, paragraph 2.9, says all members must be controlled by one member or by a single person outside the group. You control a member if you are its parent company under section 1159 of and Schedule 6 to the Companies Act 2006, would be its parent if you were a company, or are empowered by statute to control its activities. Where a partnership controls, it must do so through the partnership, with the shares normally held as partnership assets, not by the partners individually.

Groups with turnover over £10 million face two further conditions for any “specified body”: broadly a company partly owned or managed by a third party, or the sole general partner of a limited partnership, with a relevant business activity. It must pass both a benefits condition and a group accounts consolidation condition (section 3). The rules, in force since 1 August 2004, stop partly exempt groups bringing in joint ventures that are really run for outside suppliers.

What does the representative member do?

The registration is in the representative member’s name. It files the single return, pays the VAT or receives repayments, and must be given the information it needs from every member to file on time (paragraphs 2.1 and 2.4). Capital Goods Scheme items owned by any member are treated as owned by the representative member (paragraph 5.8). Late submission penalty points attach to the group through the representative member; a company joining brings no points in, and one leaving starts again at zero (paragraph 5.11, and see VAT penalty points). Errors by any member are corrected on the group return or in one disclosure for the group (paragraph 5.10, and see correcting VAT errors).

What does joint and several liability mean in practice?

If the representative member cannot pay, HMRC can recover the whole group debt from any member, and a former member remains liable for VAT due during its membership (paragraph 5.6). This affects every party. A buyer of a company that was in a seller’s VAT group inherits that exposure for past periods. A lender or minority investor in one subsidiary is exposed to the VAT debts of the rest. A solvent company in a group with a failing sister company can be pursued for VAT on supplies it never made.

What happens to supplies between group members?

Most intra group supplies are disregarded, so no VAT is charged and no VAT invoices are issued (paragraph 5.1). Input tax recovery then depends on how the group as a whole uses what each member buys. Notice 700/2 gives the example of member A buying computers and leasing them to member B, which uses them for exempt supplies: the VAT is attributed to exempt supplies and restricted (paragraph 5.5). This is why grouping often benefits partly exempt businesses, such as a shared service company supplying an insurer, and why HMRC watches for results beyond the normal operation of grouping. See partial exemption.

There are exceptions. Under section 43(2A), services bought in by an overseas establishment of a member and used to supply a UK member are charged to VAT as a reverse charge, even if no invoice is raised (section 7). Goods moving from Great Britain to Northern Ireland between members are not disregarded, and goods located in Northern Ireland are disregarded only if both members are established there (paragraph 7.3.2). Where a VAT rule depends on the status of the supplier or customer, such as an eligible body supplying education, the actual member’s status is used (paragraph 5.7).

How do you apply, and from what date?

The representative member applies through the online registration service and uploads form VAT50/51 (paragraphs 2.11 and 2.12). Treatment normally starts from the date HMRC receives the application or a later date. Backdating is normally limited to 30 days and to the start of a current accounting period of the group or of a member joining or leaving, with longer backdating only in exceptional cases such as HMRC losing the application (paragraphs 2.22 and 2.23). HMRC acknowledges within 40 working days and has 90 days to make enquiries; meanwhile the application is treated as provisionally accepted (paragraphs 2.14 to 2.17). HMRC can refuse applications that do not meet the conditions, or for the protection of the revenue (section 4).

Members are added or removed, the representative member changed or the group disbanded on form VAT50/51 (section 6). A member that stops meeting the conditions must notify HMRC within 30 days. Disbanding cancels the group number, and continuing members register separately, as described in VAT deregistration.

What does this look like in practice, and what goes wrong?

Illustration only. H Ltd owns 100% of A Ltd and 60% of the voting shares in B Ltd, all three being UK companies. All three can group because H controls each. If H later sells down to 40% and has no other form of control, B no longer meets the control test and must be removed, with HMRC notified within 30 days. B remains liable for group VAT due while it was a member.

  • Including a company that fails the control test, or forgetting to remove one after a share sale.
  • Assuming all intra group supplies are disregarded where overseas establishments or Northern Ireland goods are involved.
  • Applying the partial exemption de minimis limit company by company instead of to the group.
  • Overlooking joint and several liability in due diligence on an acquisition.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.