ACCA Advanced Taxation (ATX) Practice Exam

Can a non-corporate entity such as a partnership or sole trader join a VAT group?

1. Yes, if they control a group of companies and trade in the UK

2. No, they are not eligible for VAT groups

3. Yes, irrespective of trade activities

4. No, only corporate entities can join

The correct answer is: Yes, if they control a group of companies and trade in the UK

A non-corporate entity, such as a partnership or sole trader, can join a VAT group if it controls a group of companies and is trading in the UK. This is possible under specific circumstances where the entity has the requisite control over a corporate group, allowing it to be part of a VAT grouping that simplifies tax compliance and often results in cash flow advantages. VAT groups are primarily designed to help related businesses combine their VAT liabilities and recover claims, so the forming entity must be actively trading in the UK. The group is treated as a single taxable person for VAT purposes, which means that intra-group transactions are disregarded for VAT. This structure can potentially reduce administrative burdens and streamline VAT management. Options that suggest ineligibility for non-corporate entities overlook the specific provisions that allow them to participate under certain conditions. Therefore, a non-corporate entity can indeed join a VAT group if it meets the necessary criteria of control and trading activity in the UK.