Prior to 1 November 2019 all members of a VAT group were required to be corporate entities. New VAT legislation has now been introduced which allows controllers of VAT groups that are not ‘corporate bodies’ to be part of a VAT group. Consequently, Trusts, individuals and partnerships can now be included in VAT groups when they were not previously allowed.
A VAT group is a facilitation that allows entities that fall under common control to form a single VAT entity.
Members of a VAT group are, therefore, not required to apply VAT to recharges which in some cases can save VAT where the group contains entities that are unable to recover VAT on costs in full (because they make exempt and/or ‘non-business’ supplies).
A VAT group also saves administration since one VAT return is submitted that aggregates all members’ activities.
While many charities do have corporate status (by Royal Charter, Act of Parliament or a company Limited by Guarantee), there are many Trusts that have ultimate control of other companies within a group that have not been able to join or form VAT groups because they are not incorporated.
It should be noted that the new legislation only relates to entities that control other members of the VAT group.
If you have a ‘non-corporate’ entity such as a Trust that has not been able to be part of or form a VAT group, consideration should be given to applying to HMRC for group treatment, either by adding to an existing group or forming a VAT group.
It is important that this is given careful consideration before the application is made as forming or changing a VAT group can necessitate that changes are made to existing partial exemption and/or business non-business methods.
Should you have any further queries, please get in touch with your usual Crowe VAT contact or Robert Warne, Head of VAT.