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»Ê¹ÚÌåÓýapp VAT (Groups: eligibility) Order 2004 (SI 2004/1931), made under powers given by VAT Act 1994, section 43AA, came into force on 1 August 2004 but its effects apply to all groups formed prior to that date. »Ê¹ÚÌåÓýapp order is an anti-avoidance measure.

From 1 August 2004 “specified bodies� must satisfy two extra conditions (the benefit condition and the consolidated accounts condition) in order to be members of a VAT group. See below for a short outline of the meaning of “specified body� and of the eligibility conditions. Full details of the criteria and tests to be applied can be found in VGROUPS03000.

Specified body

A body corporate in or applying to join a VAT group is a “specified body� if all the following apply:

• the VAT group turnover exceeded £10m in the last year or is expected to exceed £10m in the coming year (see VGROUPS03190)
• the body corporate concerned is partly owned by a third party, or the business activity is managed by a third party, or the body corporate is the sole general partner of a limited partnership (see VGROUPS03210 and VGROUPS03230)
• the body corporate or limited partnership (see VGROUPS03230) has a relevant business activity - one that involves making supplies to other group members (see VGROUPS03300)
• the body is not specifically excepted from being a specified body (see VGROUPS03250).

Benefits condition

»Ê¹ÚÌåÓýapp benefits condition will be satisfied if no more than 50% of the benefits generated by the business activity accrue to third parties (see VGROUPS03210).

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Group accounts consolidation condition

»Ê¹ÚÌåÓýapp group accounts consolidation condition is satisfied if the following requirements are met:

• under generally accepted accounting practice (GAAP), a person controlling the VAT group consolidates the specified body as a subsidiary in his consolidated group accounts, and
• there is no third party (see VGROUPS03210) who under GAAP consolidates the specified body as a subsidiary in his consolidated group accounts.