- Complexity of VAT Recovery: VAT recovery in corporate transactions is intricate due to HMRC’s stringent approach, leading to extensive case law. Given the rarity of such transactions and the high input tax involved, this area poses a significant risk.
- Criteria for VAT Recovery on Deal Costs: For VAT recovery on share acquisitions, holding companies must meet specific criteria:
- Recipient of the Supply: The holding company must be named in the contract and invoices directly addressed to it.
- Economic Activity: Active involvement in managing subsidiaries qualifies for VAT recovery, while passive holding may not.
- Intention to Make Taxable Supplies: VAT costs must be directly linked to taxable supplies, evidenced by management services.
- Incorporating in a VAT Group and Stewardship: While including in a VAT group is common, engagement in economic activities remains crucial. Stewardship costs benefitting the group as a whole are recoverable, including audit fees and legal expenses.
Source Robin Prince
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