On 4 February 2016, the Upper Tribunal (in Norseman Gold plc v HMRC4) upheld the First-tier Tribunal decision that a holding company providing management services to subsidiaries, for an unspecified and undocumented charge, could not recover input tax.

HMRC argued that the holding company did not carry on an economic activity for VAT purposes during the periods for which the company sought to recover input VAT, as the company did not make supplies for consideration. Although the judge at the First-tier had accepted that the management services supplied by the company to its subsidiaries were capable of being taxable supplies, there was insufficient evidence that the parties intended any consideration to be paid for those supplies.

The Upper Tribunal held that it was not sufficient (to establish the direct and immediate link required for VAT recovery) for the holding company to have a vague intention to charge its subsidiaries for the management services at some unspecified time, and in an unspecified amount.

This decision serves as another reminder (following the BAA case) for holding companies to give early consideration to input VAT recovery.

The decision can be viewed here.