On 1 December 2017, HMRC published a summary of responses to its December 2016 VAT grouping consultation. The catalyst for the consultation was development in European case law and, in particular, the ECJ decisions in Larentia + Minerva9 and Skandia10.

The government’s response, as detailed in the latest paper, is that further work on this area is required. In terms of the tests required to be met for VAT grouping treatment, the government has stressed that all three current tests (financial, economic and organisational) should, in its view, be met in order for VAT group treatment to be granted (and maintained). Any changes in this area may require further consultation. The government also appears unwilling to widen the VAT grouping rules if the effect is a reduction in revenue. The government has committed to providing greater clarity as to VAT group eligibility for certain types of partnership.

The government’s stated view is that the VAT grouping and cost sharing exemption rules should be treated entirely separately (and that there are no plans to consider the interaction between these two areas of VAT law).

The summary of responses can be viewed here.