Holding companies ― overview

Produced by a Tolley Value Added Tax expert

Value Added Tax

Guidance

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:

•
what is a holding company?
•
when can a holding company recover VAT on costs?
•
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’

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