The recovery of VAT on transaction fees has long been a topic of interest. Following various case law decisions, HMRC has now updated its guidance on input tax recovery. During this time, several clients have seen the associated VAT recovery blocked and penalties applied. If this has occurred in the last four years, it is worth reviewing these previous penalties in the context of HMRC’s new guidelines, in case a VAT recovery can be obtained.
Amongst the services that Customs Connect provide, we offer practical, tailor-made solutions within VAT, including Transactions Reviews to maximise VAT efficiency and identify VAT opportunities within your business.
If you are about to acquire a business or raise investment through an existing or new holding company (“HoldCo”), then early planning and action is key to maximising the ability to recover the associated VAT. The following key points should be considered:
- If a new HoldCo is to be used, this should be in existence prior to any work commencing
- HoldCo should commission the supplies and contract directly with the service providers
- HoldCo should be registered for VAT before receiving the service. At the very least VAT registration should be in effect prior to the receipt of the invoice (or payment if earlier)
- Registering for VAT may be possible through the creation of or the addition to a VAT group
- HoldCo should be able to provide and undertake an economic activity, typically actively managing or financing its subsidiaries
- The management services should be documented and agreed as soon as possible
- HoldCo should be able to provide the management service and make the charge
- Whilst common themes exist, most transactions will have a unique element to them