VGROUPS02350 - Eligibility for VAT group treatment: effect of insolvency on existing groups

Insolvency of a holding company

If a holding company for a VAT Group registration becomes insolvent, an Insolvency Practitioner (IP) is appointed.  In such circumstances, the VAT Group can still exist, unless the holding company ceases to meet the control criteria as set out in the VAT Act 1994 s43A and 43AZA. The control, which must be exercised in order to fulfil this condition is set out section 1159 of and Schedule 6 to the Companies Act 2006. For more information see Public Notice 700/2 paragraph 2.2.

The holding company might cease to meet the control criteria for VAT Grouping if the IP disposes of shares and/or changes the share ownership/voting arrangements, at which point the group may need to be separated.

If the insolvent holding company is the representative member, then the group will need to appoint a new representative member who is not insolvent.

Insolvency of a group member

If a group member (other than the holding company) becomes insolvent, the fact that the IP assumes control of that company does not mean that control of the company is changed for VAT Grouping purposes. The normal control conditions will continue to be met and the subsidiary can remain in the group, unless/until the IP changes share ownership/voting arrangements or company is dissolved and ceases to exist.

If the insolvent group member concerned is the representative member, the group will need to appoint a new representative member who is not insolvent.