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HMRC internal manual

VAT Default Interest Manual

Circumstances affecting default interest: Joining a VAT group

Where a taxpayer’s application to join a VAT group is approved the taxpayer will no longer be liable to account for and pay VAT under their existing VAT registration number and will be deregistered. The representative member of the group will take on the legal obligation of accounting for and paying any future VAT due but will not be liable for any liabilities incurred before the taxpayer joined the group. 

Deregistration is not in itself a reason for inhibiting interest (see VDIM9020).  Interest can therefore continue to be charged on an assessment issued before a taxpayer joins a VAT group.  As the interest relates directly to a liability incurred before the taxpayer joined the group (that is, the assessment), it should be notified and collected in the name of the taxpayer’s former registration.   

To find guidance on how to calculate and notify interest in respect of deregistered taxpayers, see VDIM9060 and VDIM9050.