Value Added Tax Act 1994 Schedule 11A paragraph 8

Power to exclude exemption

Section 8 gives HMRC the power to issue directions that prevent businesses from artificially splitting their activities across two or more persons in order to avoid the disclosure obligations for VAT avoidance schemes imposed by paragraph 6.

• HMRC can direct that two or more persons be treated as a single taxable person where their business activities have been artificially separated, having regard to the financial, economic and organisational links between them.
• Once a direction is made, the combined activities are assessed against the conditions in paragraph 7 — if the small-scale exemption from disclosure would not apply to the combined business, it cannot apply to any of the individual persons named in the direction either.
• HMRC may only issue a direction where the named person is making taxable or exempt supplies that form part of a wider set of activities carried on by other persons, and where combining all the supplies of the business would mean the small-scale exemption thresholds in paragraph 7 are not met.
• A direction must be served on each person named in it and remains in force until HMRC revokes or replaces it with a further direction.