HMRC has been narrowing the circumstances when VAT can be reclaimed, and have actively challenged businesses when they consider VAT was incorrectly recovered.
Businesses in the Natural Resources sector often have a UK holding company to attract investment. This company office will typically employ a number of senior management, legal and financial staff, but the exploration/revenue generation asset is owned by another company.
The challenge around VAT recovery in these cases typically focuses on whether there is a sufficient link between the costs incurred by the UK holding company, and taxable supplies being made by either it or its subsidiaries.
For companies in ongoing dispute with HMRC, we recommend talking to your tax adviser straight away.
For companies setting-up for the first time, or which are yet to review their arrangements, now is the time to put the business in the strongest position possible to justify VAT recovery.
We help businesses maximise their VAT recovery by:
A case recently heard by the Court of Justice of the European Union involved Ryanair Ltd, who had incurred a significant amount of VAT on its intended acquisition of Aer Lingus.
The deal was aborted which raised the question of whether the VAT incurred was reclaimable due to there not being any taxable supplies of management charges made.
The Advocate General opined that the VAT should be recoverable because of documentary evidence that the costs would be used in the making of future taxable supplies.
This judgement of the court is expected in the near future, and it will be interesting to see what impact, if any, it has on HMRC’s approach in the UK.
To discuss these issues and how they apply to your business, please contact Robert Marchant, Partner, VAT.