VAT groups: how connected companies share one VAT registration

What a VAT group is

A VAT group lets two or more companies under common control be treated as one entity for VAT, with a single registration and one VAT return covering them all. Supplies between group members are disregarded, so no VAT is charged on internal transactions.

The benefits

Ignoring intra-group VAT removes cash-flow timing on internal charges and cuts paperwork to a single return. For groups with lots of internal trading — management charges, shared services — the saving in admin and cash timing can be significant.

The joint-and-several catch

The price is joint-and-several liability: every member is liable for the whole group's VAT debt. If one company fails to pay, HMRC can pursue the others. That risk means grouping suits genuinely aligned companies, not loosely connected ones.

When grouping does not help

If members make exempt supplies, grouping can restrict VAT recovery across the whole group, sometimes costing more than it saves. Model the partial-exemption impact before grouping — it is a common trap for groups with a property or finance arm.

Structuring for cash

However you structure VAT, group cash flow still turns on timing. A working-capital facility smooths a group's combined VAT and tax outflows.

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