HMRC Policy paper Revenue and Customs Brief 2 (2025): the use of VAT grouping within the care industry

• Overview of VAT Grouping Structures: HMRC has issued guidance regarding the formation of VAT groups that include state-regulated care providers and non-state-regulated welfare service providers, emphasizing that these structures are often used to recover VAT on exempt welfare services.
• HMRC’s Stance on Tax Avoidance: HMRC considers the use of these VAT grouping structures as a form of tax avoidance and plans to refuse new VAT group registration applications designed to facilitate such arrangements, while also reviewing existing groups for compliance.
• Action and Compliance Requirements: Organizations using VAT grouping structures are encouraged to assess their VAT accounting practices and seek professional advice, as HMRC will investigate suspected avoidance schemes and may take action, including removal from VAT groups, if necessary.

Source gov.uk

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• VAT Group Structures: HMRC highlights concerns about state-regulated care providers forming VAT groups with non-state-regulated welfare service providers to recover VAT on exempt welfare service supplies, which they deem a form of tax avoidance.
• HMRC Actions: HMRC will refuse new VAT group registrations designed to facilitate these arrangements and will review existing groups, potentially removing parties from VAT groups if avoidance schemes are identified.
• Advice for Providers: Organizations using these VAT grouping structures are advised to independently review their VAT practices and seek professional advice, as HMRC begins immediate investigations into suspected avoidance schemes.

Source KPMG

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