Dictionary
Debitoor's accounting dictionary
VAT group

VAT group - What is a VAT group?

A VAT group is a group of related companies registering to submit a VAT return together so that the process is simplified.

Debitoor is Making Tax Digital complaint so you can now submit your VAT return directly to HMRC. Try it for free with a 7 day trial.

Why are VAT groups needed?

VAT groups can streamline the process between a group of shared companies or companies that are together in limited liability partnerships, and the process acts almost like a board of companies. A VAT group will submit one VAT return for all companies involved.

What are the rules for becoming part of a VAT group?

There are a few rules to bear in mind when you're thinking about / applying to become a VAT group. To start, you need to be two companies where one is under control of the other (a parent company that has a subsidiary). "Control" in this case, is defined by one company owning at least a 50% stake. They also must have separate business premises.

So long as you meet the above criteria, you can apply to HMRC to become a VAT group. The date that this VAT group is then formed can either be the date that the application was submitted, or a date you agree with HMRC. There is a window of 90 days where HMRC can reject the group VAT application and refuse the possibility of forming as one.

How can being part of a VAT group help me?

There are various upsides when it comes to becoming a VAT group. Namely the fact that the actual submission of a VAT return becomes slightly more efficient in the sense that there only needs to be one per group. It's also a possibility for the group to include an exempt company. In this case, an exempt company refers to a company that would not be able to register for VAT in the first place, and therefore would not be able to claim input tax. Any supplies between members of a VAT group are also disregarded, which means that they can be shared evenly without any repercussions.

How might being part of a VAT group be not so helpful?

The biggest downside of being a part of a VAT group is the fact that the same time limit applies for VAT Returns, this means that there might be a scramble getting all the data together (depending on how much there is for each company) so that a VAT return can be generated correctly.

If one of the companies is an exempt company (outlined above), then this means that the entire group is treated as "partially exempt", which has the added consequence of input tax for the group being restricted.

Lastly, there is a distinct possibility that the combined turnover of the two companies that form the group will be higher than £2.3 million, and therefore, VAT would need to be paid on a monthly basis which could add more hassle and paperwork to the mix. Of course, it is always important to bear in mind that there are still strict rules when you're a VAT group, and any late VAT returns will have higher payment penalties attached.

VAT groups and Debitoor

Although Debitoor does not strictly support VAT return submissions as a group, we can help you to easily organise, store, and generate reports that can be used for the overall VAT submission.

Debitoor has been approved for HMRC's Making Tax Digital, which means that you can now submit your VAT return directly to them via our integration. For plans that support VAT reporting (M & L), we're ready for Making Tax Digital when you are.