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HMRC internal manual

VAT Accounting Manual

Stagger manipulation between associated businesses: best practice in casework

The procedure to be followed in all cases is as follows:

(a) In every case, a written record of the reasons behind the decision is to be kept. This will include factors that have been considered and any other relevant information that was taken into account. This should be filed in the business’ folder or eFolder with a copy of the decision letter.

(b) Businesses should be advised, in writing, that you are considering the issue of aligning accounting periods between the associated businesses, providing them with the opportunity to make representations. You should say why you are considering issuing a direction, or using the Regulation 25(1)(a) power to refuse or withdraw monthly returns.

(c) If you decide to proceed, your recommendations (including the full reasoning as in (a) above) should be submitted to the Senior Avoidance Investigator (SAI) for agreement. Without this approval, or that of the VPOT - VRAP Team, no direction is to be issued.

(d) Once approval is given, a direction letter should be issued to the business. This must make explicit reference to the legislative power being used, and include the reason why the direction is issued. The same requirement applies if the letter is not a direction, but a refusal to allow monthly returns (see (f) below).

(e) Businesses should always be directed onto the same stagger. Normally, the business obtaining the tax advantage should be directed onto the same stagger as the other. If the businesses request that both be directed onto the same, but requested stagger differs from the one you have proposed, this should be allowed where possible.

(f) Where one business is making monthly returns and the other is making quarterly returns, then the business making monthly returns should be placed onto the same quarterly stagger. Monthly returns are permitted under Regulation 25(1) and we would be withdrawing the permission to use the monthly VAT return regime rather than issuing a direction. In these circumstances, it is not necessary to issue a Notice of Direction. But a notification of the change of stagger should be issued, giving the business time to make representations before the action is taken. If the businesses request that both are placed on monthly returns, this should be allowed where possible.

(g) The reporting officer should take appropriate action to amend the business’ stagger. This should be timed to give the business reasonable time in which to make representations against the decision.

If there is any doubt or disagreement, the case should be referred with the recommendation of both the reporting officer and the SAI, to the VPOT - VRAP Team