Business tax – guidance

VAT registration for groups, divisions and joint ventures

How to register a group of companies, company divisions, joint business ventures and business units for VAT and what to do if they are changed after registration.

Overview

It is the ‘person’, not the business, who is registered for VAT. A person can be either an individual or a legal person or entity and each VAT registration covers all the business activities of the registered person.

A legal person is an entity or body which has an existence separate and distinct from the persons (legal or natural) comprising that entity or body.

If 2 people work together as a joint venture, the joint venture may have to register for VAT.

Related companies or limited liability partnerships can register as a single taxable person - a VAT group. Unincorporated business units may be able to register as VAT divisions.

Joint ventures and VAT

If you and another person intend to work together on a business or project as a joint venture, HM Revenue and Customs (HMRC) may consider this as a partnership. This would be a new and separate person for VAT registration purposes. The joint venture may have to register for VAT if its turnover is above the relevant threshold.

Group registration

Two or more companies or limited liability partnerships - known as ‘bodies corporate’ - can register as a single taxable person or VAT group if:

  • each body has its principal or registered office in the UK and
  • they are under common control, for example 1 or more company is a subsidiary of a parent company

If the turnover of the VAT group is over £10 million per year and the group is partly owned or managed by a third party, you can only register as a group for VAT if:

  • no more than 50% of benefits generated by the business go to third parties
  • your group uses consolidated accounting
  • no third party consolidates your group into its accounts

A VAT group is treated in the same way as a single taxable person registered for VAT on its own. The registration is made in the name of the ‘representative member’, who is responsible for completing and submitting a single VAT Return and making VAT payments or receiving VAT refunds on behalf of the group. All the members of the group remain jointly and severally liable for any VAT debts.

How to register your group for VAT

You can register your group for VAT online. You must download forms VAT 50 and VAT 51, complete them online and then attach them to your application. If you are applying online you can’t send your forms through the post.

You can also apply to register a group for VAT by post. You should print out forms VAT 1, VAT 50 and VAT 51 for completion and post them to HMRC.

Your application for VAT group registration may be refused if HMRC decides that:

  • you do not meet the eligibility criteria
  • your VAT group registration would result in VAT avoidance or significantly decreased VAT paid

HMRC will tell you when a decision about your registration has been made.

Using an accountant

If you want your accountant to register a VAT group, or make changes to an existing group on your behalf, you must inform HMRC of this using form VAT 53.

Adding or removing companies from your group

Once you are registered as a group, you can make the following changes:

  • add additional members to an existing group
  • remove members from an existing group
  • change the representative member
  • disband the group

You can disband your VAT group online, but for all other changes you must send forms to HMRC by post. You should use:

  • form VAT 56 to change the representative member of a VAT group
  • form VAT 50 to change or disband the group
  • form VAT 51 to provide details of the companies involved

Adding an acquired company to the VAT group

If you buy a business as a going concern which becomes part of the group, you may have to account for VAT on the purchase if that business will only be supplying goods or services to other companies in the group.

Divisions or business units

A body corporate with business units or divisions that are not limited companies may be able to register each of them separately for VAT. Each unit or division would have its own VAT registration number and each must account separately for VAT.

Even though each division would be VAT registered separately, the body corporate is still a single taxable person and remains liable for any VAT debts of all the divisions. You cannot combine divisional VAT registration and VAT group registration.

For the purposes of divisional VAT registration, a body corporate is trading in divisions if:

  • it has 2 or more branches, sites or departments that carry out different functions or trade in different geographical areas
  • each branch has its own independent accounting systems

In addition bodies corporate may only be approved for divisional VAT registration if:

  • all divisions are registered, even those whose turnover does not exceed the VAT registration threshold
  • the whole body corporate is fully taxable, for example it has no exempt sales
  • all divisions have the same tax periods for submitting their VAT Returns

How to register divisions or business units for VAT

To register divisions or business units of your company for VAT you need to:

  • complete a VAT 1 form for each division or business unit
  • explain in detail, in a letter, why it is difficult for you to submit a single VAT Return for the company
  • provide evidence that your company is incorporated, for example incorporation certificates

You can download the application forms to register your business units or divisions for VAT, but the registration cannot currently be completed online. The forms must be printed out for completion, and then sent with your supporting documentation to HMRC.