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HMRC internal manual

VAT Groups

VAT avoidance - groups of companies statement of practice on the new Schedule 9A VATA 1994: scope of the new provisions

Finance Act 1996, section 31, and Schedule 4, insert a new Schedule 9A into the VAT Act 1994. Essentially, this increases the powers available to Customs in connection with the registration of VAT groups under the VAT Act 1994, section 43.

The new powers (Schedule 9A, paragraph 3) enable the Commissioners of Customs and Excise to direct that:

  • separately registered companies eligible to be treated as members of a VAT group may be compelled to group from a specified date, or
  • a company within a group may be compelled to leave a group from a specified date, and
  • a supply within a group initially treated as a disregarded supply may subsequently be subjected to tax.

To neutralise fully the tax advantage gained by an avoidance scheme, a direction may require assumptions to be made in connection with matters arising prior to its issue. Special provisions (Schedule 9A, Paragraph 6(1)) enable an assessment to be issued to recover tax which would have been due had those assumptions reflected the actual position.