VAT registration ― artificial separation of business activities (disaggregation)

Produced by a Tolley Value Added Tax expert
Value Added Tax
Guidance

VAT registration ― artificial separation of business activities (disaggregation)

Produced by a Tolley Value Added Tax expert
Value Added Tax
Guidance
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This guidance note should be read in conjunction with the VAT registration ― compulsory guidance note and is relevant to persons established or resident in the UK. Persons that are not established or resident in the UK cannot benefit from the UK VAT registration threshold. This guidance note:

  1. explains what is meant by artificial separation of business activities

  2. explains what is meant by closely bound by financial, economic and organisational links

  3. explains what is meant by a Notice of Direction and the implications of a Notice being issued

  4. provides practical points to consider

For detailed commentary please refer to De Voil Indirect Tax Service V2.190C and V2.223.

What is artificial separation of business activities?

Artificial separation of business activities occurs when taxable business activities are artificially separated between two or more persons that are bound to one another by financial, economic, and organisational links. HMRC has statutory powers to challenge such arrangements and issue a Notice of Direction that the persons named in the

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