Groups of companies can apply to HMRC to operate as a VAT group so that transactions between those companies are ignored for VAT purposes.
The group will submit one VAT return covering the sales and purchases of all members, which is a big administrative saving. The main disadvantage of a VAT group is that all members are jointly and severally liable for the VAT debts of any member of the group.
If you form a new company to run alongside your existing companies it is important to bring that company into the VAT group from the date it is first registered for VAT. This requires two extra forms: VAT50 and VAT51 to be completed. Do not assume that because the new company is wholly owned by another member of the corporate group that it automatically joins the VAT group – it does not.
Some groups of companies are headed-up by a partnership, or commonly owned by an individual. Since 1 November 2019, it has been possible for those non-corporate organisations or individuals to join the VAT group with the companies they control.
However, the non-corporate head of the group must operate a trade on its own account and be established for business purposes in the UK. If a holding company controls the other companies in the group it does not have to carry on a trade-in its own name.
