Value Added Tax

Holding companies ― VAT grouping

Produced by Tolley
  • 06 Apr 2022 18:11

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

  • Holding companies ― VAT grouping
  • How does VAT grouping impact a holding company’s entitlement to recover VAT?
  • Stewardship costs
  • Practical points ― VAT groups and holding companies

Holding companies ― VAT grouping

This guidance note looks at the effect of VAT grouping a holding company with its subsidiaries.

For an overview of VAT and holding companies generally, see the Holding companies ― overview guidance note.

For VAT grouping generally, see the VAT group and divisional registration ― overview guidance note.

How does VAT grouping impact a holding company’s entitlement to recover VAT?

Subject to meeting the conditions outlined in the VAT groups ― conditions guidance note, a holding company may join a VAT group. Even holding companies which do not have any trading (business) activities or which make only exempt supplies may be entitled to VAT group with their subsidiaries.

However, HMRC will not accept that joining a VAT group on its own will automatically give rise to an entitlement to VAT recovery.

HMRC has indicated that VAT grouping cannot change a non-economic activity into an economic activity (for the VAT status of activities, see the Holding companies ― VAT status of activities guidance note). This means that to recover VAT on supplies received for the purposes of the holding company, it’s important that the holding company is

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