On 16 July 2015, the European Court of Justice (ECJ) judgment in Larentia + Minerva and others8 confirmed the earlier Advocate General’s (AG’s) opinion that a holding company actively managing its subsidiaries does not carry on both economic and non-economic activities for VAT purposes.

To view our earlier commentary on the AG’s opinion, click here.

As a result of the ECJ’s judgment, it should be expected that a holding company actively managing all its subsidiaries should be entitled to full input VAT recovery on its acquisition costs. It will be interesting to see whether HMRC updates its most recent guidance in light of this judgment.

In addition, the ECJ upheld the AG’s opinion as to whether a member state may restrict VAT group membership to persons having legal personality (it cannot). It will also, therefore, be interesting to see if HMRC addresses this aspect of the judgment, as in the UK such membership is currently limited to bodies corporate.

The decision can be found here.