Holding companies VAT recovery of costs

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1 Holding companies VAT recovery of costs 3

2 Agenda Background to HMRC Guidance VAT case law Matters of principle arising HMRC Guidance What will stay the same? 2 3 HMRC Guidance What will change? Future VAT Landscape 4 5 Slide 2

3 . Background to HMRC guidance Backlog of VAT cases at Tribunal standing behind BAA/Airtours 2 Consultation with Big 4 advisors 3 4 Settlement of some cases through central ADR HMRC request for comment on Draft Guidance Slide 3

4 VAT case law Slide 4

5 2. VAT case law Matters of principle arising 2. Passive holding companies Polysar investments Netherlands BV C-60/ Investrand BV C-435/ BAA 203 EWCA Slide 5

6 2. VAT case law Matters of principle arising 2.2 Active holding companies Larentia & Minerva C08/34 Cibo Participations SA C-6/00 Securenta C-437/ Slide 6

7 2. VAT case law Matters of principle arising 2.3 Management services Welthgrove BV C-02/00 MVM C-28/6 Norseman Gold 206 UKUT 69 African Consolidated Resources 204 UKFTT Slide 7

8 2. VAT case law Matters of principle arising 2.4 Partial exemption Empressa de Desenvolvimento Mineiro SGPS (EDM) C-77/ Floridiene SA and Berginvest SA C- 42/ Slide 8

9 HMRC guidance Slide 9

10 3. HMRC guidance What will stay the same? Recipient of supply Passive Holdco in a VAT group 2 Slide 0

11 3. HMRC guidance What will change? Intention to make taxable supplies in future Recouping of acquisition costs by way of management charges replaced by management services that are genuine with fees more than nominal 2 Slide

12 3. HMRC guidance What will change? Corporate bodies acquiring shareholding as a direct, continuous and necessary extension of a taxable economic activity Stewardship costs Cost of sales 2 3 Slide 2

13 Future VAT landscape Slide 3

Future VAT landscape Some areas clearer but still uncertainty Value of charges made or to be made Stewardship/Shareholder costs Corporate acquisitions vs PE

14 Future VAT landscape Some areas clearer but still uncertainty Value of charges made or to be made Stewardship/Shareholder costs Corporate acquisitions vs PE backed acquisitions Importance of VAT recovery strategy in advance of costs being incurred More challenge expected from HMRC going forward Life after Brexit? Slide 4

15 contacts David Denyer M: E: Iain Rawlings M: E: Slide 5

16 This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. 207 PricewaterhouseCoopers LLP. All rights reserved. In this document, refers to the UK member firm, and may sometimes refer to the network. Each member firm is a separate legal entity. Please see for further details LM-OS

Indirect tax forum VAT establishments April 2018

www.pwc.co.uk Indirect tax forum VAT establishments Agenda VAT establishments basic principles Hastings Insurance Services Ltd - implications 1 2 Topical issues Questions 2 3 4 4 2 What are the basic principles?