CH192130 - Penalty reform - penalties for failing to File VAT returns by the due date for periods from 1 January 2023: penalties for failing to submit VAT returns: VAT groups and divisional registrations

NB: “These rules currently only apply to VAT for VAT periods starting on or after 1 January 2023. These rules will come into force for other tax regimes at a future date. You must check the date from which these rules apply for the tax or duty you are dealing with”

VAT Group treatment

Under section 43 VATA 1994, VAT registration is made in the name of the representative member. The representative member is therefore the taxable person and is responsible for submitting the returns on behalf of the group.

A VAT group’s representative member has a single liability for the purpose of penalty points, compliance periods and financial penalties for all members of the group.

The penalty point and financial penalty position for the VAT group is unaffected by:

  • Changes to the businesses within the VAT group, for example a business joining or leaving the group.
  • Any change to the representative member of the group- a new representative member is treated as having any points that were accrued prior to the change of representative member.

Where a business leaves a VAT group and is required to be separately registered for VAT in its own right, the new VAT registration will start with zero penalty points irrespective of how many points the VAT group it has left had.

A newly registered VAT group will start with zero penalty points, even if the businesses that form part of the new VAT group had penalty points prior to the new group’s formation.

For example, A Ltd has 1 penalty point. They join a VAT group with 3 penalty points. A Ltd.’s penalty point expires, and the VAT group remains on 3 penalty points. If B Ltd were to leave the VAT group and register for VAT individually, B Ltd would start with 0 penalty points and the VAT group would remain on 3 penalty points, even if B Ltd had previously been the representative member of the VAT group.

For more on VAT group treatment, see section 43(1) VATA 1994 and VGROUPS01000.

VAT Notice 700/2

Divisional Registration

Where a body corporate that is organised in divisions submits separate VAT returns for each division under section 46(1) VATA 1994, each division has:

  • A separate group of returns (see groups 4 A, B and C at CH192110).
  • A separate penalty point total.
  • A separate liability to financial penalties.

For more on VAT divisional registrations, see section 46(1) VATA 1994 and VGROUPS09000

VAT Notice 700/2

FA2021 SCH24 para 4 & 14