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.