The proposal Proposed future operation of grouping VAT Avoidance Grouping and the European Union Consultation Report on the results of the exercise Comments Back to the top Background 1. The group treatment facility was introduced in the UK as a business facilitation measure at the inception of VAT in 1973 and brought benefits to both the taxpayer and to Customs. It permits corporate bodies which are under common control and which are 'resident' or have 'an established place of business' in the UK to form VAT groups. Only one VAT registration is required for the group of companies and supplies between members are disregarded for VAT purposes. One member of the group is nominated as the representative member and is responsible for accounting for VAT on behalf of all the other members of the group.
All members are jointly and severally liable for VAT due from the representative member.
Membership of a VAT group is normally determined by businesses, who can elect which of their companies should be grouped and which should be registered separately and can move companies in and out of those groups with relative ease. However, any applications to group may be refused if it is considered 'necessary to do so for the protection of the revenue' and, in certain circumstances, attempts at VAT avoidance can be countered by compulsorily changing the composition of a group or by suspending the disregarding of supplies. The current grouping structures carry a significant revenue cost which was last estimated to be in the region of 400 million. Moreover, over recent years, group treatment has been increasingly exploited to facilitate the operation of VAT avoidance schemes. This has led to a substantial loss of revenue and the consequent enactment of a number of anti-avoidance provisions.