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HMRC ‘reviewing input tax recovery’ following BAA

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HMRC has reviewed its guidance on the recovery of VAT incurred by holding companies in the wake of the Court of Appeal decision in the case of BAA Ltd [2013] STC 752. The guidance in HMRC’s VAT input tax manual has been revised, and covers: when a shareholding is used as part of an economic activity; when VAT may be recoverable by a holding company; the effect of a holding company joining a VAT group; and how to treat mixed economic and non-economic activities.

HMRC indicated that there has been no change in policy. However, a Deloitte client briefing observed that: ‘Taken together with the challenges to VAT recovery in the cases of Norseman Gold PLC and African Consolidated Resources PLC, this suggests that the recovery of VAT on costs incurred by holding companies is likely to come under increased scrutiny’. HMRC stated, in Revenue and Customs Brief 32/2014, that it will review its policy again following the CJEU’s judgments in two German cases (Larentia + Minerva and others (C-108/14) and (C-109/14)), expected in about 12 to 18 months.

Categories: News , Indirect taxes , VAT