VAT reclaim and HMRC

VAT Groups and Property Purchases

PropertyVAT Team · Updated 21 October 2026 · 3 min read

VAT grouping is common in property structures and changes several practical things at once — who files, who claims, and whether an intra-group transfer carries VAT at all.

What a VAT group does

Eligible bodies under common control can register as a single VAT group. The effects:

• One VAT registration number for the group
• One return, filed by the representative member
• Supplies between members are generally disregarded for VAT
• All members are jointly and severally liable for the group's VAT

The group is treated as a single taxable person. That is the key idea from which everything else follows.

The intra-group transfer point

Because supplies between members are generally disregarded, moving a property between group companies may carry no VAT.

For groups reorganising their holdings, that can remove a funding requirement entirely. There is no 20% to find and no reclaim to wait for.

Two cautions:

• Other taxes still apply. SDLT, LBTT or LTT has its own rules on intra-group transactions, with reliefs and clawback provisions. VAT being disregarded says nothing about the transaction tax.
• The Capital Goods Scheme continues to run. A property within its adjustment period keeps adjusting, and a change of use within the group can trigger consequences.

Who claims on an external purchase

This is where structures go wrong administratively.

If the buying SPV is a group member, the representative member accounts for VAT and files the return. The SPV does not file its own.

Practical consequences:

1. The VAT invoice should be addressed correctly for the group's purposes. An invoice naming an entity in a way that does not align with the registration causes questions on a repayment claim.
2. The reclaim appears in the group return, netted against the group's other activity. A large property refund may be partly absorbed by output tax elsewhere, which changes the cash profile.
3. Lenders need to understand this. A VAT facility whose exit is "the HMRC refund" needs to know that the refund arrives via the representative member, possibly net of other group VAT.

That third point is worth raising early with any VAT lender. It is not a problem, but it is different from a standalone SPV where the refund arrives whole and attributable.

The partial exemption risk

This is the substantive reason not to group reflexively.

If the group contains members making exempt supplies — residential letting, some financial services, unopted commercial property — the group is partly exempt. Recovery on a property purchase may then be apportioned rather than full.

A standalone SPV holding a single opted property may recover in full. The same SPV inside a group with exempt activity may not.

Before grouping a property company, model the recovery position both ways. The difference on a seven-figure VAT amount can be substantial.

Joint and several liability

All members are jointly and severally liable for the group's VAT debts.

For a property SPV with a lender's charge over it, that is a real consideration — the SPV carries exposure to liabilities generated elsewhere in the group. Lenders sometimes take a view on this, so flag it early rather than at documentation stage.

The option to tax in a group context

Options to tax and group registration interact in ways that need care. Grouping does not simply merge the VAT history of the members, and the treatment of options across a group should be confirmed with an adviser rather than assumed.

If your purchase depends on an option being in place and effective, get the position confirmed specifically for the group structure.

Questions to settle before buying

1. Will the buying entity be in the group, or standalone?
2. Does the group contain exempt activity, and what does that do to recovery?
3. Who is the representative member, and how should the VAT invoice be addressed?
4. How will the refund arrive, and net of what?
5. Does your lender understand the group filing position?
6. Is the option to tax position confirmed for the group structure?

This guide is general information, not tax advice. VAT grouping is technical and interacts with partial exemption and the Capital Goods Scheme — take specialist advice.