HM Customs and Excise  CE 10
                                                  17 March 1998
______________________________________________________________

VAT GROUP TREATMENT - CONSULTATION 

The Chancellor has today announced consultation on the
operation of the VAT  grouping facility.  The consultation
will ask for views on the possible restriction of this 
facility to fully taxable companies as a means of achieving a
better balance between  revenue costs to the Exchequer and
compliance costs to business, and to minimise  tax avoidance
opportunities.

The comments received will also be helpful in informing the UK
position in EU discussions expected on this issue.


DETAILS

Customs and Excise will shortly be publishing a consultation
document which  identifies the options considered and sets out
a specific proposal to restrict the  facility to fully taxable
companies.  Following the date of publication 3 months will be 
allowed for representations to be made. 


NOTES TO EDITORS

1.   The VAT Act 1994, section 43, permits companies which are
under common  control to form groups for VAT purposes. This is
a business facilitation measure  which is intended to reduce
the administrative burdens on businesses. Only one VAT 
registration is required for all the companies within the
group and supplies between  group members are disregarded for
VAT.  One member of the group is nominated as  the
representative member and is responsible for accounting for
VAT on behalf of all  the other members of the group. All
supplies of goods and services made by or to  any member of
the group are treated as if they were made by or to the
company  nominated as the representative member.


2.   Subject to Customs' power to refuse applications, group
treatment is currently  available to any corporate body which
satisfies a number of prescribed conditions.   The facility is
sufficiently flexible to allow the corporate group itself to
decide which  companies it will include in its VAT group(s)
and to move those companies in and out  with relative ease. 
This flexibility has presented significant opportunities for 
avoidance.  

3.    The existence of the facility in its current form also
has a significant revenue  cost. This cost arises as a result
of VAT not having to be accounted for on  disregarded,
intra-group supplies, so that the limitations on the ability
to reclaim tax  incurred on purchases which are normally
imposed on exempt or partly exempt  businesses do not bite.

4.   This consultation exercise is designed to achieve a
better balance between  revenue and compliance costs, and to
minimise tax avoidance opportunities.  It will  also inform
the UK position in EC consultations which are expected on the
grouping  provisions. 



Press enquiries only to HM Customs and Excise, Public
Relations Office, New  King's Beam House, 22 Upper Ground,
London, SE1 9PJ. 
Telephone:  0171 865 5468/5471

Others should contact their local VAT Business Advice Centre,
listed under  Customs and Excise in the telephone book.

Customs and Excise Internet address: 
http://www.open.gov.uk/customs/c&ehome.htm

This news release can also be found at :
http://www.hm-treasury.gov.uk. Other Treasury material can
also be found at  this address.