Option to tax and VAT group registrations

Produced by Tolley
Option to tax and VAT group registrations

The following Value Added Tax guidance note Produced 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?
  • Automatically ceasing to be a relevant associate
  • Ceasing to be a relevant associate after 20 years
  • Obtaining permission from HMRC

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 and divisional registration ― overview guidance note.

Note that HMRC has made some temporary changes to notifying an option to tax during the COVID-19 (coronavirus) outbreak (notably extending the deadline for notification from 30 to 90 days). For more details see the Coronavirus (COVID-19) and VAT - further VAT consequences guidance note.

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:

  1. 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 t

Popular documents