VAT grouping consultation – NHF response

10 December 2020

HM Treasury issued a Call for Evidence last month in relation to VAT grouping. We have responded and recommended that the UK does not introduce compulsory VAT grouping.

The consultation asked for views on questions relating to three specific topics:

  • The establishment provisions, primarily a comparison of ‘whole establishment’ and ‘establishment only’ bases of including an entity in a VAT group.
  • Potential issues arising from the introduction of compulsory VAT grouping.
  • Grouping eligibility criteria for entities not included in the current legislation, including limited partnerships.

Our response focuses on the aspect of compulsory VAT grouping as it is this area that would have the most impact on our members if the proposed changes are introduced. We have recommended that the UK does not introduce compulsory VAT grouping for entities that fall within the scope of VATA 1994 s43 as it would create a number of negative impacts for housing associations:

  • Increasing irrecoverable VAT costs associated with the development of homes for social/market rent.
  • Increased difficulty in utilising the cost sharing exemption.
  • VAT costs trapped within the supply chain due to increased use of the option to tax disapplication relief.

At this stage it has only been possible to provide a high level response to the questions raised. For this reason, we have requested a meeting with HM Treasury to discuss this further and give us the opportunity to engage in order to demonstrate the impact on individual housing associations.

Who to speak to

Adam Gravely, Finance Policy Officer