The extent to which VAT may or may not be reclaimed on costs incurred by holding companies is one of the longest running sagas in the history of VAT.
The recent Court of Justice of the European Union (CJEU) decision in the joint cases of Larentia and Minerva provides the latest chapter in this saga.
Very broadly, the judgement confirms that holding companies are entitled to full recovery of input VAT to the extent that the costs in question relate to the active management of the holding company’s subsidiaries.
HMRC is now under increasing pressure to review its position on this issue as the UK guidance currently falls some way short of the CJEU’s decision. It is to be hoped that revised guidance consistent with the Larentia/Minerva decision will be issued in the near future. In the meantime, holding companies should consider their VAT position carefully to ensure that they protect their VAT position and maximise recovery to the fullest extent possible.