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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