Tag Archives: HMRC-powers

VAT Grouping: Protection of the Revenue

By   9 December 2025
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The salient amendments are to the references to ‘protection of the revenue’ and ‘Revenue loss’.
VAT grouping is a facilitation measure by which two or more entities can be treated as a single taxable person (a single VAT registration) for VAT purposes. The measure was once restricted to “Bodies Corporate” which includes; companies of all types and limited liability partnerships. However, from 1 November 2019, grouping is additionally available for all entities, including; partnerships, sole traders and Trusts in certain cases.
HMRC has the vires to refuse an application for a VAT group, or remove a member if HMRC consider that it may lead to a VAT loss.

The Change

“The definition of ‘protection of the revenue’

Where this is considered necessary for the protection of the revenue, the VAT grouping legislation gives HMRC the power to:

  • prevent a person joining a VAT group
  • remove an existing member from a VAT group

We usually will not use our protection of the revenue powers if the revenue loss follows from the normal operation of grouping. If we feel that the revenue loss does not follow the normal operation of grouping, then we would consider using our protection of the revenue powers, such as:

  • where we identify enhanced risks to the collection of revenue
  • the use of VAT avoidance and distortion in the liability of the group’s supplies

In this context, ‘revenue loss’ means the VAT that is not charged when one company in a group sells to another company in the same group. This usually happens when one or more companies in the VAT group cannot reclaim all the VAT they pay because they make supplies that are exempt from VAT.

We will use our revenue protection powers if it looks like the main reason for VAT grouping someone is to ignore supplies from that company’s overseas branches to other members of the VAT group.

This applies whether that person is established in the UK or has a UK fixed establishment”.

VAT: Collection of tax debts

By   8 July 2021
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HMRC has announced its approach to collecting debts after Covid-19.

The Policy Paper explains that the government’s priority is protecting livelihoods and keeping people in work. It states that HMRC has been central to this, for example by pausing many of its debt collection activities and delivering support packages.

However, HMRC is restarting its collection of outstanding debts and will be contacting taxpayers who have fallen behind with VAT and other taxes as a result of the pandemic.

HMRC action

If there is a VAT debt, HMRC will contact a business by phone, post or text message so that they can discuss the situation and agree a way forward. It is important for businesses to respond to these communications as soon as possible because, if there is no reply, HMRC cannot establish whether support is needed or there is a simple refusal to pay.

Time To Pay

HMRC usually discuss payment options, such as a payment plan (called Time to Pay – TTP), which is paying off the debt in affordable instalments.

NB: HMRC typically have more than half a million of TTP arrangements in place and more than nine out of ten of them complete successfully.

As part of agreeing Time to Pay arrangements with businesses, HMRC may also discuss other forms of support available. For example, exploring the range of government-backed lending support like Bounce Back loans and Coronavirus Business Interruption Loans, and agreeing repayment holidays or extending repayment terms.

More information about payment arrangements (Time to pay) is available at How HMRC supports customers who have a tax debt.

Deferral

If a business cannot make a payment immediately, by getting in touch with HMRC it may be possible to arrange a short-term VAT deferral. This means nothing would need to be paid for a set period of time, and no further action to collect the tax debt would be taken until that time has lapsed.

Further powers

Although HMRC state that it will take an “understanding and supportive approach” to tax debt, from September 2021, where businesses are unwilling to discuss a payment plan, or where they ignore attempts to contact them, HMRC may start the process of collecting the debt using its enforcement powers. These powers include; taking control of goods, summary warrants and court action including insolvency proceedings.

As may be seen, ignoring tax debts is not a good policy. Talk to HMRC and see if the various support schemes available are suitable.