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V2.190B Group VAT registration—anti-avoidance and control

FA 1996 introduced new anti-avoidance provisions¹ to counter the alleged abuse of VAT group treatment. These provisions target the sort of schemes that rely on the ability to move individual companies in to and out of a group ('entry' and 'exit' schemes), resulting in the group, or associate companies, being able to take full or enhanced input tax deduction to which they would not otherwise have been entitled².

A statement of practice has also been published by HMRC³, outlining the circumstances under which it will and will not invoke the provisions.

In Thorn Materials Supply Ltd and Thorn Resources Ltd⁴, it was held that the grouping provisions are designed to simplify and facilitate the collection of tax, not to confer exemption or relief from tax. Therefore, there was no warrant for a part payment made between two group companies to be permanently excluded from the charge to VAT.