Updated HMRC guidance for holding companies and VAT recovery


HMRC have released the updated guidance for holding companies and VAT recovery. This is important because the role of a holding company can differ and as a result so will its VAT status and eligibility to reclaim VAT on costs. 

Calculating VAT

This updated guidance from HMRC defines what a holding company is and helps determine whether it is engaged in economic activity or not.  The guidance also covers whether VAT incurred by a holding company is deductible based on that economic activity.  For VAT to be deductible on a supply to a holding company, that holding company must contract, use, be invoiced and pay for the supply.  Additionally, there must be a direct and immediate link to taxable supplies.

This is a good opportunity to review the activity of your holding companies and ensure you are maximising your VAT position.

The link to the new guidance is here

https://www.gov.uk/hmrc-internal-manuals/vat-input-tax/vit40100

https://www.gov.uk/hmrc-internal-manuals/vat-input-tax/vit40600

For further information please contact our Director of VAT, Alison Birch

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