VAT Groups and Holding Companies Flashcards
What is the significance of the Prudential Assurance Company case?
Payments made after Prudential had left the VAT group, relating to supplies whilst it was in the group, were taxable.
The tribunal noted that the contract stated payments could be due many years after the services were supplied.
What is the significance of the Norseman Gold case?
NG supplied management services to subsidiaries. The judge was satisfied that management services were supplied, however at the time the supplies were made, no price or payment terms had been agreed.
Per Tolsma, any payment would have been voluntary and would not have been consideration for a supply.
The decision not to charge subsidiaries until they could afford to pay amounted to a gratuitous supply.
What is the significance of the African Consolidated Resources case?
ACR was deregistered from VAT by HMRC and denied re-registration. The holding company made loans to subsidiaries on which 4% interest was accruing but no interest had yet been paid.
The tribunal decided that charging a flat fee of 4% interest without a definite term or any sure date on which the interest would be paid was not commercial, and was therefore more like equity funding than economic lending.
Some management charges had been made to one subsidiary but these were made at a level the subsidiary could afford to pay and was not seen as economic activity. The payment was deferred indefinitely by adding to an intercompany debt.
What is the significance of the MVM case?
MVM also provided management services to its subsidiaries and services were also provided to members of its corporate group to which it belonged. MVM did not levy a charge for these services.
It sought input tax recovery on the basis that it elected to receive higher dividends instead of a charge.
There was not a direct link between the taxable output and as such, input tax recovery was blocked.
What is the significance of the w Resources case?
Incurred costs in relation to obtaining funding for two subsidiaries and intended to recharge these costs once they generated income.
The FTT held in line with the decision in Norseman Gold, the fact that the payment was contingent on the subsidiary generating income broke the link between the provision of services and consideration, because WR’s ability to issue an invoice was contingent on the taxable income.
What is the significance of the Tower Resources [2019] case?
The FTT found that where subsidiaries made payment via increases in an intercompany loan, this was consideration for supplies and allowed input tax recovery for the holding company.
HMRC appealed to the UT and the tribunal agreed with the FTT.
