(September 27, 2014)
On September 25, 2014 the HM Revenue & Customs (hereafter: HMRC) released Revenue and Customs Brief 32 (2014): VAT – policy on holding companies. In this brief the HMRC announces that it has updated its guidance to set out when HMRC considers that VAT recovery may be possible.
According to the brief the HMRC has reviewed its policy following the decision of the Court of Appeal in the case of British Airport Authority (BAA) ( England and Wales Court of Appeal Civ 112). According to the Revenue and Customs brief, the decision of the Court of Appeal confirms that VAT is only recoverable where there is a direct and immediate link to taxable supplies. BAA was refused permission to appeal to the Supreme Court.
In the brief HMRC state that following the decision of the Court of Appeal there is no change in HMRC’s policy. However according to HMRC the facts in BAA related to particular circumstances and the decision does not address other commonly encountered issues relating to holding companies. HMRC has therefore updated its guidance to set out when HMRC considers that VAT recovery may be possible.
The new guidance covers the following issues
- when a shareholding is used as part of an economic activity;
- when VAT may be recoverable by a holding company;
- the effect of a holding company joining a VAT Group;
- how to treat mixed economic and non-economic activities.
For further information click here to be forwarded to Revenue and Customs Brief 32 (2014): VAT –policy on holding companies as published on the website of the HMRC, which will open in a new window.
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