Difficult issues can arise in relation to VAT recovery by holding companies, particularly in relation to corporate transactions, such as where a holding company incurs input tax on fees in acquiring shares in a subsidiary. HMRC has revised its guidance. This confirms that VAT recovery can be made where the holding company is the recipient of the supply; the holding company is undertaking economic activity for VAT purposes, such as supplying management services; and the economic activity involves the making of taxable supplies. Groups should consider VAT early on and evidence intentions to supply management services.
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