VAT group

If a company makes zero rated sales then it will be in a position to reclaim input tax and receive repayments of VAT on its VAT returns, hence it may choose to submit monthly rather than quarterly returns to improve its cash flow. If this company joined a group VAT registration where the other companies paid over VAT to HMRC then the group returns would be submitted on a quarterly basis and hence repayments on a monthly basis would cease and the effect would simply be to reduce the group’s overall quarterly payments. Better therefore to keep the company out of the group VAT registration to maintain monthly repayments while letting the rest of the group pay over its VAT on a quarterly basis.

Zero rated supplies (sales) are taxable, but at a zero rate. As they are taxable supplies this allows input tax on purchases and expenses incurred in relation to them, to be recovered! Input tax incurred in relation to exempt supplies is however NOT recoverable!
If a company makes zero rated supplies but has standard rated inputs this will mean that it has suffered more input tax than it has charged output tax and will be due a repayment from HMRC, hence a good idea to submit monthly returns rather than just quarterly returns to get the cash flow advantage. If such a company is in a group better therefore to leave it out of the group VAT registration as per my answer above.
If, however a group company makes exempt supplies it is unable to recover its input tax attributable to its exempt supplies. If we join this company into a group VAT registration then it makes the group as a whole partially exempt which therefore affects the whole group’s ability to recover its input VAT. This may therefore result in the group as a whole paying over more VAT to HMRC – clearly not a good idea!!