In April 2017 HMRC released their updated guidance for holding companies and VAT recovery. This is important because the activities of a holding company can differ and as a result so will its VAT status and eligibility to reclaim VAT on costs.
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.
