VAT registration ― artificial separation of business activities

Produced by Tolley

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

  • VAT registration ― artificial separation of business activities
  • What is artificial separation of business activities?
  • What is meant by closely bound by financial, economic and organisational links?
  • What is a Notice of Direction?
  • Practical points

VAT registration ― artificial separation of business activities

IP COMPLETION DAY: 11pm (GMT) on 31 December 2020 marked the end of the Brexit transition / implementation period entered into following the UK’s withdrawal from the EU. At this point in time, key transitional arrangements came to an end and significant changes began to take effect across the UK’s VAT and customs regime. This document contains guidance on subjects potentially impacted by these changes. Before continuing your research, see the Brexit — overview guidance note.

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 Notice are to be treated as

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