HMRC has been forced to consider widening the scope of its VAT grouping provisions in the light of a recent decision of the Court of Justice of the European Union (Cases C-108/14 and 109/14 Larentia + Minerva).

It is clear from this case law that the UK VAT grouping rules are out of line with EU law. HMRC has therefore announced that it will be consulting on the issue. Click here to view the Revenue and Customs Brief.

At the moment only "bodies corporate" can join a UK VAT group if they are under common control.

HMRC are proposing to make changes which are likely to include:

Extending the VAT group to non-corporates (which could be helpful for trustees of pension funds which are not corporate trustees)

Identifying new rules to determine the EU test of "close economic, financial and organisational" links for corporate and non-corporate bodies and so replacing the current "control" test.

EU law provides that "Member States may regard as a single taxable person any persons established in the territory of that Member State who, while legally independent, are closely bound to one another by financial, economic and organisational links. A Member State exercising [this] option …may adopt measures needed to prevent tax evasion or avoidance through the use of this provision".