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VAT group registration

Reference is usually made to a VAT-registered business. However, this is not quite correct as it is the person, either real or legal, that is actually registered. For example, where sole trader has a number of different business activities it is not possible to register them separately. Is the sole trader themselves that the VAT number relates to.

In the case of companies, all activities carried out by the company will come under the company’s VAT registration number. However, where there are a number of companies, they will usually have their own registrations even if they are under common ownership.

Generally, where companies in the circumstances make supplies to one another the supplies must be treated as normal sales and purchases. This can lead to cash flow issues, particularly where the companies have different VAT return periods.

A potential solution to this is to register the companies as a single VAT group. Transactions between group members are then not generally subject to VAT which alleviates the cash flow issue discussed above. Additionally, only one VAT return is needed for the group as a whole which can cut down on administration. The main disadvantage of using a group is that group members are jointly and severally liable for any VAT debts. It is however possible to cherry pick which companies become group members.

Since November 2019, partnerships sole traders and trusts can join a VAT group as well as companies. The requirements of group registration are set out in VAT Notice 700/2.

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