Care must be taken when considering the recoverability of input tax incurred by a holding company.
In the past holding companies which were members of a VAT Group were treated in the same way as any other member of the group. As a result, input tax incurred by the holding company were recoverable by reference the the VAT group’s (as a whole) recovery position.
As a result of the recent Court of Appeal judgement in the case of BAA Ltd HMRC have announced an updated policy HERE
The revised policy is that that input tax is only recoverable by holding companies where it is incurred in the course of an economic activity and there is a direct and immediate link to taxable supplies, This means that a passive holding company cannot now rely solely on its membership of a VAT group to recover input tax. For recovery, the VAT must be incurred in respect of taxable supplies made by the holding company itself.
For information on the impacts on this change – please contact us.