The European Court of Justice (ECJ) last week ruled that input VAT paid in takeover deals is recoverable. In Beteiligungsgesellschaft Larentia (C-108/14) and Marenave Schiffahrts (C-109/14) the ECJ held that a holding company which took an active involvement in managing subsidiaries could recover input tax on acquiring shares, as the holding company was engaged in an economic activity. Where only some subsidiaries were managed then there had to be an apportionment. The ECJ ruling could help UK companies recover VAT due to them. HMRC in its guidance manuals (VIT40600 – When is VAT recoverable by holding companies) take a more restrictive approach, which may now have to be revised in the light of the ECJ judgment.
Tax Barrister, Accountant