Holding companies and management charges
Current Issues | VAT | 15th September 2016
VAT registration and recovery of VAT incurred on expenditure has always been tricky for holding companies and things have become even more difficult following a recent case, Norseman Gold. The key points to emerge from this case were:
Holding companies must be actively involved in the management of their subsidiaries in order to justify VAT registration.
To enable input VAT recovery there must be clear agreements between the parties detailing the services to be provided, the charges to be levied and the dates by which payment must be made, and the subsidiary must actually pay for the services it receives.
HMRC officers are already using this case to deny VAT recovery in any situation where there are intra-group supplies of services where there are no agreements or the services have not been paid for. If your business could be affected, you should take immediate action to protect your VAT position.
Specific advice should be obtained before taking action, or refraining from taking action, on the basis of this information.