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HMRC internal manual

VAT Groups

Eligibility for VAT group treatment: control conditions: methods of control

For the purpose of group treatment, company B is controlled by company (or person) A if any of the following apply:

  • A holds a majority of voting rights in B or
  • A is a member of B and has the right to appoint or remove a majority of B’s board of directors or
  • A is a member of B and controls alone, pursuant to an agreement with other shareholders or members, a majority of the voting rights in B, or
  • B is a subsidiary of a company, which is itself a subsidiary of A.

For the purposes of these control conditions, rights or shares are treated as held by a company if they are held by one, or more, of its subsidiaries.

For example:

If A holds 100% of the shares in B, C & D, and B, C & D each hold 33.3% of the shares in E, F & G, the shares that B, C & D hold in E, F & G are treated as being held by A. The result is that A controls E, F & G even though B, C & D only hold a third each of the voting rights in those companies.

A corporate body can also control another corporate body if it is empowered to do so by an Act of Parliament or by Royal Charter. This applies rarely, normally only in the public sector.