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.
From 19 January 2026, HMRC announced that overseas establishments of businesses VAT grouped in the UK should be treated as part of that VAT group even when located in an EU member state that does not operate whole entity VAT grouping.
In November 2025, HMRC’s Revenue and Customs Brief 7 invited businesses that had accounted for VAT under previous guidance to submit error correction notices to reclaim overpaid VAT.
Sections 43, 43A, and 43B of the Value Added Tax Act 1994 govern UK VAT grouping, allowing two or more eligible persons to be treated as a single taxable person for VAT purposes.
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