Good news for holding companies

At the end of last year, HMRC announced that it is revising its policy with regard to VAT recoveries made by holding companies, and will be taking a more relaxed view. We are currently waiting for HMRC to release their formal policy which we believe is imminent.

The issue of what VAT can be recovered by a holding company has been the subject of significant case law over many years. HMRC last announced its policy in September 2014, and at that time, HMRC said that it would be looking much more critically as to how costs were being used by the holding companies. Importantly, it said that it would be expecting some sort of disallowance to be made in respect of VAT recoveries to reflect pure holding company activities.

Since that time however, some high profile VAT cases have been heard at the Court of Justice of the European Union, and the results of these have indicated that HMRC’s view is too restrictive. As long as the holding company is providing genuine services to its subsidiaries, then it should be possible to recover VAT incurred on expenditure (i.e. including pure holding company activities) and not make any restriction.
We understand that HMRC is withdrawing from some of the ongoing litigation, and is in the process of drafting guidance setting out their revised views.
Corporate groups should be actively reviewing the arrangements that they have in place for their holding companies and how they treat the VAT incurred. Also, if any restriction has been, or is being made, it may now be possible to recover this VAT, and potentially make a claim for any VAT that has not been recovered or disallowed by HMRC to date.  

Contact us for further information or to find out how we can help you.