VAT Grouping – Establishment, Eligibility and Registration

*Update: CTG’s response to the consultation can be read here: VAT Grouping – Establishment, Eligibility and Registration Call for Evidence – Charity Tax Group response*

HM Treasury has published a call for evidence – closing 20 November – titled: VAT Grouping – Establishment, Eligibility, and Registration Call for Evidence.

The call for evidence examines how VAT grouping provisions operate in the UK and looks at potential changes, including on establishment and compulsory grouping. It will examine three distinct areas of VAT grouping:

  • The establishment provisions
  • Compulsory VAT grouping
  • Grouping eligibility criteria for businesses currently not in legislation, including limited partnerships.

Responses should be sent to [email protected] before 20 November 2020. A summary of the questions are as follows:

  1. What are the advantages of ‘whole establishment’ provisions; how do they facilitate business activity in the UK?
  2. Do the ‘whole establishment’ provisions make the UK a more attractive business destination than countries that utilise ‘establishment only’ provisions, both across all industries and within specific sectors?
  3. Are the advantages of the whole establishment provisions equally accessible to all companies? Does the size or location of the VAT group head office impact this?
  4. What additional benefits do ‘whole establishment’ provisions bring to businesses and sectors, including those unrelated to tax?
  5. What disadvantages arise as a result of the ‘whole establishment’ provisions?
  6. How would a change to ‘establishment only’ provisions affect UK businesses that utilise VAT grouping? Please outline both positive and negative changes.
  7. Which sectors would likely be affected if the UK were to adopt ‘establishment only’ provisions?
  8. Would adopting the ‘establishment only’ provisions result in a reduced administrative burden for businesses?
  9. Would adopting the ‘establishment only’ provisions result in any increased administrative burden from applying the reverse charge to all supplies from overseas? Would this be offset by the reduction of administration in applying the current anti-avoidance legislation, S43(2A)?
  10. Would adopting the ‘establishment only’ provisions have a financial impact upon affected businesses?
  11. Would adopting the ‘establishment only’ provisions have an impact on the geographical allocation of jobs (both within and outside of the UK) in affected businesses?
  12. Would adopting ‘establishment only’ provisions impact on business competitiveness, both for those VAT groups that are headquartered in the UK and those based overseas?
  13. What impacts have the revised arrangements introduced in response to the Skandia ruling had on your business?
  14. Would any further changes to the current arrangements materially impact your business or sector?
  15. Do you want to maintain the current arrangements that were implemented in response to Skandia, or reverse them?
  16. What benefits or disadvantages could a system of compulsory VAT grouping deliver for businesses? Would this vary between different sectors?
  17. How would compulsory VAT grouping impact the administrative processes for businesses?
  18. How would compulsory VAT grouping interact with ‘establishment only’ VAT grouping provisions, if they were to be implemented?
  19. How would compulsory VAT grouping impact businesses of different sizes, and would the minimised risk of errors be of benefit?
  20. Are there any instances where businesses are not VAT grouped for specific commercial or regulatory reasons? Please provide examples.
  21. How do limited partnerships (LPs) and Scottish limited partnerships (SLPs) currently participate in VAT groups?
  22. How do LPs and SLPs tend to be used within the structure of corporate groups and what is the commercial rationale for inserting them into VAT groups?
  23. What, if any, commercial reasons are there for having more than one general partner in a LP that may affect VAT grouping arrangements?
  24. In cases where a LP has more than one general partner, what commercial reasons are there to add more than one general partner to the same VAT group?
  25. If the test for VAT grouping LPs/SLPs changed to a control and beneficial ownership test, how would this affect current VAT groups and the LPs/SLPs in question, including those that would be able to VAT group, and those that would have to be removed from existing VAT groups?
  26. When considering the normal eligibility tests for VAT grouping, what would the impact be on VAT groups if those tests were applied to LPs and Scottish partnerships as a whole rather than just general partners?
  27. Would it be beneficial to allow Scottish partnerships to join a VAT group subject to the same rules as other entities (i.e. where they are controlled, rather than controlling all other members of the VAT group)? Should the same treatment also apply to general partnerships?
  28. Were any changes discussed in chapters one and two to be implemented, how could they impact on the inclusion of partnerships within VAT groups?