VAT & Care Groups

The First-tier Tribunal's decision in Beritaz Care Ltd raises two points that any care provider operating within a VAT group should be aware of: what happens when HMRC fails to respond to a grouping application within the statutory period, and the limits of what the Tribunal can do when the outcome is not what was intended.

The Beritaz VAT group was established in 2021. A related company was not included in the original application - an oversight attributed to the company's former VAT advisers. An application to add the omitted company was made in 2025, with a request that membership be backdated to the original formation date.

HMRC did not respond to the application within the 90-day statutory period. Under the VAT grouping rules, failure to refuse an application within that window results in the application being treated as granted by operation of law. The consequence here, however, was that the deemed grant took effect from the date of the application - not from the backdated date requested. When HMRC eventually issued its decision, it confirmed the new member's inclusion from the application date and refused to exercise its discretion to backdate.

Beritaz appealed. The Tribunal struck out the appeal on the basis that it had no jurisdiction to hear it. The application had already been granted - there was no refusal of membership to challenge. A refusal to exercise a discretion, such as backdating, does not carry a statutory right of appeal to the Tribunal. Any challenge of that nature would require a different route entirely.

The practical lesson from Beritaz is straightforward: ensuring all eligible entities are included in a VAT group from the outset is considerably simpler than attempting to correct an omission after the fact. The 90-day deemed acceptance rule does not deliver a backdated position - it delivers prospective membership only, and the discretion to go further is HMRC's alone.

That lesson sits alongside a broader development that every care provider with a VAT group structure should now be considering. In April 2025, HMRC published Revenue and Customs Brief 2 (2025), making clear that it considers certain VAT grouping arrangements in the care sector - specifically those involving regulated and non-regulated entities structured to improve VAT recovery - to be a form of tax avoidance. HMRC has begun reviewing existing arrangements and will refuse new applications of this type. No legislation has changed, but the policy environment has shifted materially.

Any care provider with a VAT group structure in place, whatever its form, should now be taking specific advice.