Option to tax and VAT group registrations

By Tolley
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The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Option to tax and VAT group registrations
  • What is a relevant associate?
  • When will a company cease to be a relevant associate?

This guidance note provides an overview of the impact of opting to tax on companies included in a VAT group. For more information on group registration, see the VAT group registration guidance note.

VATA 1994, Sch 10, para 4

If a company which is a member of a VAT group opts to tax a property, the option to tax will generally be binding on other companies included in the same VAT group registration. The other companies in the VAT group are referred to as 'relevant associates' of the company that opted to tax the property. As a result, if a relevant associate makes any supplies of the opted property it will be required to charge VAT, even if those supplies are made after the company leaves the VAT group.

What is a relevant associate?

A company will be a relevant associate if:

  • the company was in the same VAT group as the company that opted to tax (the opter) on the effective date of the option to tax
  • the company was in the same VAT group as the opter at any later time when the opter has an interest in an opted property
  • the company is in the same VAT group as another relevant associate of the opter when the relevant associate has an interest in the opted property
When will a company cease to be a relevant associate?

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