Company A is vat registered and complete returns accordingley. Company B is wholly owned by Company A. Company B had vatable business income of £50k per annum but is not themselves vat registered - they choose to not register as the £50k is charged to the pulic so and they don't want to have to add 20% on to the price. There are no inter group charges betweeen the two.
Am I correct that company A & B do NOT have to form a vat group?
If so - what would stop Company A from palming off each sales activity into new subsidiaries to prevent having to add 20% on to their sales? i.e constantly remaining beneath the compulsory registration threshold by creating more and more subsidiaries. (to note 80% of costs are salaries so very little input tax to reclaim)
I had in mind that they would have to group together for the very reason of avoiding my second point but my reading suggests this is not the case.