VAT groups ― specified bodies and protection of the revenue

By Tolley

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

  • VAT groups ― specified bodies and protection of the revenue
  • Specified bodies
  • Protecting the revenue
  • Intra-group supplies
  • HMRC action

This guidance note should be read in conjunction with the VAT group registration guidance note and provides an overview of the various anti-avoidance provisions that have been introduced by HMRC over the years in order to combat the use of VAT groups to avoid VAT.

VATA 1994, ss 43A, 43B, 43C; Notice 700/2 

This guidance note provides an overview of the powers that HMRC has to either refuse to allow a body corporate to join a VAT group or remove it from a VAT group for the protection of the revenue.

The following conditions need to be satisfied in order for a specified body to remain in a VAT group.

Specified bodies

Anti-avoidance provisions were introduced in 2004 and as a result introduced a new category called ‘specified bodies’. It should be noted that these provisions only apply when the specified body is carrying on a relevant activity so the rules do not cover dormant companies.


A body corporate is a specified body if it meets all of the following conditions:

  • the turnover of the VAT group exceeds £10m in the last year or is expected to in the next 12 months. Turnover is the value of all supplies made by the VAT group to parties outside of the VAT group (taxable, exempt and outside the scope supplies). The expected turnover for the next 12 months should be based on the assumption that the body corporate is included in the VAT group. If the body corporate is a sole general partner of a limited partnership, the limited partnership’s income should be included
  • the body corporate is either:
    • owned by a third party (see below)
    • managed by a third party
    • the sole general

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