HMRC has reset UK VAT grouping rules, allowing overseas establishments to be treated as part of a UK VAT group and removing EU case law such as Skandia and Danske Bank. The new policy reduces cross‑border VAT friction and invites businesses to correct over‑declared VAT, while expanding HMRC’s discretion to deny grouping where it sees collection risk or distortive outcomes.
HMRC’s Revenue and Customs Brief 7 (2025) now treats overseas establishments of UK VAT‑grouped entities as members of the UK VAT group, even if the overseas jurisdiction does not recognise whole‑entity VAT grouping.
The notice expands the definition of “protection of the revenue” to include collection risk and distortive outcomes, giving HMRC greater latitude to deny VAT grouping where it believes the result would undermine the VAT system.
HMRC invites businesses to revisit prior periods and correct over‑declared VAT, potentially unlocking significant recoveries.
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Reuters · 2 days ago
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Stewart's Law · 5 days ago
HMRC has reversed its stance on UK VAT grouping, allowing overseas establishments of UK VAT groups to be treated as part of the group even in EU member states that do not allow whole entity VAT grouping. The change, announced on 19 January 2026, follows a November 2025 brief that also invites businesses to reclaim overpaid VAT. The shift aims to simplify cross‑border compliance and attract foreign investment, while expanding revenue‑protection rules.
