Use of grouping in the care industry may be avoidance

State-regulated care providers are increasingly using VAT grouping structures to recover VAT on costs that relate to supplies of welfare services that would otherwise be exempt from VAT according to HMRC. These structures incorporate an unregulated entity into the supply chain between the state-regulated provider and the local authority or NHS integrated care board to which the supply is made. Identical supplies made to private individuals remain exempt from VAT.

HMRC considers these structures to be a form of tax avoidance and will where necessary refuse new VAT group registration applications that are designed to implement and facilitate them.

It states that organisations already using these VAT grouping structures should review their VAT accounting practices independently and obtain professional advice.

HMRC is launching a programme to review and investigate all instances where it is known or suspected that an avoidance scheme is in...