Holding companies ― overview

Produced by Tolley

The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Holding companies ― overview
  • What is a holding company?
  • When can a holding company recover VAT?
  • Is the holding company carrying out a taxable business?
  • Is the holding company the recipient of the supply?
  • Is there a direct and immediate link between the supply and the taxable business of the holding company?
  • What is the effect of VAT grouping a holding company with its subsidiaries?
  • Practical points ― VAT and holding companies

Holding companies ― overview

VAT for holding companies is a complex and highly litigated area, particularly when it comes to the entitlement of holding companies to recover the VAT that they incur on costs. HMRC’s policy has developed over time but it still often takes an aggressive approach in denying holding companies VAT recovery on costs. Holding companies should exercise extreme caution when it comes to their VAT affairs and they should plan carefully and early (particularly in relation to acquisitions and disposals of shareholdings).

This guidance note provides an overview of some of the key VAT considerations for holding companies, specifically:

  1. what is a holding company?

  2. when can a holding company recover VAT on costs?

  3. the effect of VAT grouping for holding companies

What is a holding company?

HMRC suggests that in simple terms, a holding company is a company that acquires and holds shares in one or more subsidiary companies. In reality, a range of different types of businesses may be referred to as ‘holding companies’. Some holding companies may be entirely ‘passive’ (eg t

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