Joint Liability and Group Management

Joint and Several Liability

All members of a tax group are jointly and severally liable for the group's VAT obligations. This means:

• The FTA can recover any unpaid VAT or penalties from any group member, not just the representative member.
• If one member is unable to pay, the FTA can pursue other members.
• Each member is responsible for ensuring the group's compliance.

Practical Implications

1. Risk assessment: Before joining a group, a company should assess the VAT compliance of other potential members.
2. Indemnification agreements: Members may agree internally to indemnify each other, but these are not binding on the FTA.
3. Monitoring: The representative member should monitor compliance across all group members.

Group Management Considerations

Intra-Group Transactions

• Supplies between group members are ignored for VAT purposes.
• No tax invoices are issued between group members.
• No input tax or output tax is accounted for on intra-group supplies.

Mixed Supplies

If the group includes members making taxable and exempt supplies:

• The group must apportion input tax at the group level.
• Input tax on shared costs (e.g., group IT systems) must be apportioned based on the group's overall taxable-to-total ratio.

Adding and Removing Members

• Adding: New members can be added with FTA approval; effective from the next tax period.
• Removing: Members can be removed (e.g., upon sale, restructuring, or dissolution); the removed member must register individually if still making taxable supplies.

Changes in Control

If control of a group member changes (e.g., sale of a subsidiary):

• The member may no longer qualify for the group.
• The FTA must be notified.
• The member may need to register individually.

Group Deregistration

The entire group can be deregistered if:

• The group ceases to make taxable supplies.
• The group no longer meets the eligibility criteria.
• The members choose to deregister.