Following the decision of the Court of Appeal in British Airport Authority HMRC1 has updated its guidance on the VAT treatment of holding companies. The decision confirms recoverability of VAT is only possible where there is a direct and immediate link between the taxable supplies. The revised guidance covers commonly encountered issues relating to holding companies such as:

  • if a holding company acquires a shareholding as a direct, continuous and necessary extension of its taxable economic activity, the VAT incurred, if it has a direct and immediate link to the taxable supplies, may be recoverable
  • 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

On the same subject matter, the German courts have referred the cases of Larentia and Minerva and others2 to the Court of Justice of the European Union (CJEU) and further revised guidance is likely in the wake of the judgment in these joined cases within the next 12 to 18 months.

To read Revenue and Customs Brief 32 (2014) click here.

To read recent updates to the VAT Input Tax Manual click here.