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Holding companies, VAT groups and funds

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In Melford Capital, the First-tier Tribunal ruled that the general partner of an English limited partnership was entitled to recover VAT on the costs it incurred setting up and operating an investment structure. HMRC’s decision to test its arguments on the interaction between VAT grouping and the recoverability of VAT incurred by a holding company in the context of this investment fund structure seems curious. With investment funds, the manager and the general partner acquire shares for the purpose of earning a reward for the application of their investment expertise. It is difficult to see this as anything other than an economic activity.

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