Reform of VAT Grouping Rules

Gary Hughes

Special Projects Manager

From 1st November 2019 partnerships, sole traders and trusts can join a VAT group if they control the other corporate bodies in that group.

Main conditions

There are two main conditions for non-corporate bodies being able to join a VAT group from 1st November 2019:

  1. i)The non-corporate entity must be entitled to register for VAT in its own right, i.e. it is or is intending to make taxable supplies.
  2. ii)The non-corporate entity must control all of the corporate bodies in the group, which broadly speaking means owning 51% of the shares in the other corporates.

The new rules are best illustrated by way of an example:

Bob and Simon are builders and trade as a partnership. The partnership (not the individuals) owns 75% of ‘Builder Limited’. As the partnership has a controlling interest in the company ‘The Bob and Simon Partnership’ and ‘Builder Limited’ can form a VAT group.

Advantages & Disadvantages of a VAT Group

There are two principal advantages of being in a VAT group:

  1. i)Supplies of goods or services between group members are not subject to VAT, thereby giving a potential cashflow advantage.
  2. ii)Only one VAT return is needed for each period for the group, as opposed to individual VAT returns for each separately VAT registered business.

The principal disadvantage of a VAT group is that all group members are jointly and severally liable for any VAT debts of the group.


VAT grouping is a useful cashflow and timesaving tool for qualifying businesses, but each case needs to be looked at on merit, and the individual position of each potential VAT group member will need to be considered.

How Hallidays can help

If you would like expert advice please contact our specialist tax team on 0161 476 8276, email or visit to learn more about how we can help.


The information contained herein is of a general nature and is not intended to be received as formal professional advice. Whilst we endeavour to provide accurate information, there can be no guarantee that the information is accurate as of the date it is received, or that it will continue to be accurate in the future, due to legislative changes. It is therefore important that before you act upon any information contained herein you seek appropriate professional advice to take account of your exact circumstances.

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