Value Added Tax Act 1994 section 44

Supplies to groups

Section 44 deals with the VAT treatment of chargeable assets transferred as part of a going concern into a VAT group, creating a deemed supply to and by the representative member to protect the tax position.

• When a business or part of a business is transferred as a going concern into a VAT group and chargeable assets are included, those assets are treated as simultaneously supplied to and by the representative member at open market value, triggering a VAT charge.
• This deemed supply does not apply where the representative member has full input tax recovery, where the assets were held by the transferor for more than three years before transfer, or where the capital goods scheme already provides for input tax adjustments on those assets.
• The deemed supply by the representative member is excluded from the input tax recovery calculation, and the value used is the open market value — the price that would be agreed between unrelated parties on a VAT-free sale.
• HMRC may reduce the VAT charged under this provision where the transferor did not receive full input tax credit on the original acquisition of the chargeable assets; chargeable assets are those whose supply would be taxable and not zero-rated.

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