What is a VAT group and how does it work?
Answered 11 March 2026
Here is a comprehensive answer on what a VAT group is and how it works.
What is a VAT Group and How Does It Work?
What the law says
The core rule — s.43 VATA 1994
Under section 43(1) of the Value Added Tax Act 1994, where persons are treated as members of a group:
- any business carried on by a member of the group is treated as carried on by the representative member;
- any supply of goods or services between group members is disregarded for VAT purposes;
- any supply to or from a group member (other than an intra-group supply) is treated as a supply by or to the representative member;
- any VAT on importation by a group member is treated as paid by the representative member;
- all members are jointly and severally liable for any VAT due from the representative member.
Eligibility — s.43A VATA 1994
Two or more bodies corporate are eligible to form a VAT group if:
- each is established or has a fixed establishment in the UK;
- they are under common control — one controls each of the others, one person controls all of them, or two or more individuals in partnership control all of them.
"Control" is based on the definition of holding company and subsidiary in section 1159 of and Schedule 6 to the Companies Act 2006.
Exception — intra-group reverse charge (s.43(2A) VATA 1994)
Not all intra-group supplies are automatically disregarded. Where an overseas group member buys in services from outside the group and supplies them on to a UK group member, those supplies are not disregarded and VAT becomes due via the representative member.
Anti-avoidance — Schedule 9A VATA 1994
Schedule 9A makes provision to ensure that section 43 is not used for tax avoidance.
HMRC guidance / practice
How it works in practice
A group of eligible persons may apply to be treated as a single taxable person for VAT purposes. The registration is made in the name of the representative member, who is responsible for completing and submitting the single VAT return on behalf of the whole group.
The representative member is responsible for paying VAT or receiving repayments, but all eligible persons are jointly and severally liable for any VAT debts.
When a taxpayer joins a VAT group, their existing VAT registration is cancelled and they are deregistered. The representative member takes on the legal obligation for future VAT, but is not responsible for VAT liabilities incurred before the member joined the group.
Key practical consequences
| Feature | Effect |
|---|---|
| Single taxable person | One VAT return for the whole group |
| Intra-group supplies | Normally disregarded — no VAT charged between members |
| Partial exemption | Only one partial exemption method for the whole group |
| Input tax recovery | Must be considered by reference to the use by the VAT group as a whole |
| Penalties | The representative member has a single liability for penalty points and financial penalties for all group members |
Specified bodies (groups with turnover over £10 million)
Since 1 August 2004, certain bodies corporate called "specified bodies" must satisfy two extra eligibility conditions to be members of a VAT group. This prevents partly exempt buyers of services setting up joint ventures within their VAT group to avoid irrecoverable VAT. This only affects VAT groups with a turnover over £10 million per year.
Retrospective group registration
Where entities have been acting as a VAT group without formal approval, HMRC requires a formal application and will investigate. Retrospective group VAT registration is subject to the eligibility criteria being fully satisfied and any VAT due having been properly accounted for.
Citation sources
ion as if the only description applicable to the representative member were the description in fact applicable to that person . 1AB Subsection (1AA) above does not apply to the extent that what is material for the purposes of the relevant provision is whether a person is a taxable person. 1A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 An order under section 5(5) or (6) may make provision for securing that any goods or services which, if all the members of the group were one
Under section 43A of the VAT Act 1994, bodies corporate can form a VAT group if: each is established or has a fixed establishment in the UK (read section 10.4) they are under common control (read paragraph 2.9) they satisfy the conditions set out in section 3 (if applicable) ‘Control’ for this purpose has a special meaning based on the definition of holding company and subsidiary in section 1159 of and Schedule 6 to the Companies Act 2006. This definition of VAT group eligibility has been in for
Part II Value Added Tax Other provisions relating to charges to VAT Groups: anti-avoidance. 31 1 In section 43 of the Value Added Tax Act 1994 (groups of companies), after subsection (8) there shall be inserted the following subsection— 9 Schedule 9A (which makes provision for ensuring that this section is not used for tax avoidance) shall have effect. 2 After Schedule 9 to that Act there shall be inserted the Schedule set out in Schedule 4 to this Act. 3 In section 83 of that Act (appeals), aft
The procedural guidance in this manual only covers the VAT Mainframe and VISION processes. For guidance on the Making Tax Digital and ETMP processes for fully migrated customers, see VAEC0200 and the Making Tax Digital for VAT compliance toolkit. How HMRC treat groups of companies is covered by Section 43 of the VAT Act 1994. VAT group treatment is an arrangement which allows two or more corporate bodies to account for VAT as a single taxable person. The representative member of the group is reg
Since 1 August 2004, certain bodies corporate, called ‘specified bodies’, have been required to satisfy 2 extra conditions in order to be members of a VAT group. This is to prevent partly exempt buyers of services setting up joint ventures within their VAT group, in order to buy in services without incurring irrecoverable VAT. The joint venture companies are in reality run by and for the benefit of third party suppliers, who exercise control over them in practice. The following paragraphs descri
A group of eligible persons may apply to be treated as a single taxable person for VAT purposes. The registration is made in the name of the representative member, who is responsible for completing and rendering the single return on behalf of the group. Whilst the representative member is responsible for paying the VAT or receiving any repayment due, all the eligible persons are jointly and severally liable for any VAT debts. Supplies between group members are normally disregarded for VAT (read
This occurs where entities have been acting as a VAT group and assume that it is acceptable to HMRC. Although all the conditions may have been fulfilled throughout, the entities have not applied for, nor been granted, group treatment. Where it comes to our attention that this has happened HMRC would expect co-operation from the entities as we carry out our investigation. You should be aware that in such circumstance a formal application for group VAT treatment is required and HMRC must consider
Where a taxpayer’s application to join a VAT group is approved the taxpayer will no longer be liable to account for and pay VAT under their existing VAT registration number and will be deregistered. The representative member of the group will take on the legal obligation of accounting for and paying any future VAT due but will not be liable for any liabilities incurred before the taxpayer joined the group. Deregistration is not in itself a reason for inhibiting interest (see VDIM9020). Interest
Input tax recovery by VAT groups must be considered in terms of the use by the VAT group as a whole of the goods and services received by each individual member. All intra-group supplies are disregarded. Thus input tax on advice received by company A used to provide advice intra-group to company B is exempt input tax if company B uses the advice it receives to make supplies with no right to deduct. It may be that company A never makes any supplies with no right to deduct itself yet it incurs exe
Part III Application of Act in particular cases Groups of companies. 43 1 Where under sections 43A to 43D any persons are treated as members of a group, any business carried on by a member of the group shall be treated as carried on by the representative member, and— a any supply of goods or services by a member of the group to another member of the group shall be disregarded; and b any supply which is a supply to which paragraph (a) above does not apply and is a supply of goods or services by o
Since 1 August 2004 ‘specified bodies’ must satisfy 2 extra conditions in order to be members of a VAT group. Read section 3 for the definition of ‘specified body’ and for details of the eligibility conditions. This only affects VAT groups with a turnover over £10 million per year.
There are 3 important points to remember regarding partial exemption and VAT groups. Points to remember Therefore 1. A VAT group is treated as a single person trading through its representative member. it will have only one partial exemption method for the whole group. However, in deciding whether your VAT group can treat property or financial transactions as incidental for the purposes of the standard method calculation the different business activities of the group should be considered separat
Under section 43 VATA 1994, VAT registration is made in the name of the representative member. The representative member is therefore the taxable person and is responsible for submitting the returns on behalf of the group. A VAT group’s representative member has a single liability for the purpose of penalty points, compliance periods and financial penalties for all members of the group. The penalty point and financial penalty position for the VAT group is unaffected by: Changes to the businesses