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Scope of VAT grouping - Law Society response

2 March 2017

The Law Society has responded to HM Revenue & Custom's (HMRC) consultation on the scope of VAT grouping.

The consultation looked at whether to make changes to UK VAT grouping following decisions of the Court of Justice of the European Union (CJEU).

The main focus of the consultation looked at options around eligibility requirements for VAT group registration and the impact of policy changes following the CJEU decision in Skandia. It also looks at the interaction between VAT grouping and cost sharing provisions.

Our response looks at the balance between the range of entities allowed to join a VAT group and an easily administered eligibility test.

We support HMRC’s intention to broaden the scope of VAT grouping, in line with recent CJEU decisions. We do not, however, consider that a piecemeal reform of the rules only to cover the forms of entity covered by those decisions would be appropriate.

We believe that, although the current eligibility tests based on definitions in the Companies Act 2006 has some benefits in terms of simplicity, using such a definition is narrower that the test required by Article 11. We want to ensure that any new eligibility test covers the relationships embodied in the current test, so that existing VAT groups are not adversely affected by any change. Our response outlines a number of potential alternative tests that could be employed.