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Andrew Needham, Director of VAT Specialists Ltd, provides VAT tips for some company owners and those incurring travel costs in the EU. 

Getting back the VAT on the costs of a holding company

If you set up a holding company to provide management services to one or more subsidiaries, it can either register for VAT individually because it makes taxable supplies to its subsidiaries, or else it can register as part of a VAT group registration. 

However, what do you do if it is a ‘pure’ holding company that makes no taxable supplies at all? Although a pure holding company makes no taxable supplies, it will receive costs for professional services such as accountancy and legal fees. 

What can be done to recover VAT on such costs? 

Well, because it makes no taxable supplies, it can’t register for VAT in its own right. However, it can register for VAT as part of a VAT group, which then enables it to recover all the VAT on its overheads.

However, although HMRC have accepted this in their own internal guidance (HMRC Manual V1-13, Section 15, para 15.3) and published a News Release as long ago as 1993 (News Release 59/93), some of its Officers do not seem to be aware of it, and will say that it cannot register for VAT. If this happens, you should draw the Officer’s attention to the above publication. This should speed up your VAT registration, so that you can quickly reclaim all the input VAT you are entitled to!

Get your kicks from a VAT 66!

If you travel or incur costs in the EU, it is now that time of year to make sure that you claim the VAT back on any of these costs, for example, hotel bills, conferences or exhibitions you have attended.

How do I make a claim? The first thing you need is a VAT 66 certificate from the Grimsby VAT Registration Unit, which can be requested by letter, fax, or email (they don’t provide a number for telephone requests for some reason). You will next need to get a VAT 65 application form, which is on HMRC’s website at http://www.hmrc.gov.uk/index.htm  Remember that the VAT65 form must be completed in the language of the country you are claiming the refund from. This can prove difficult, but in a lot of cases, the actual amount of text you will need to write is minimal. Once you have both forms, you can then list all the invoices and VAT amounts, and send the VAT 65 and 66 along with the original invoices to the country’s tax authority. A list of the relevant addresses can be found in Notice 723 or on the HMRC website.

Tip 1  The period of a claim is a calendar year, and you have 6 months to make the claim. This means that you should have sent the claim by 30 June in the following year. Most countries are fairly stiff about the time limits and late claims are normally rejected, so make sure you make your claim on time.

Tip 2 The current paper-based process for reclaiming EU VAT is to be replaced by a fully electronic system from 1 January 2010. HMRC are still consulting on this, so those expecting to make a claim next year will need to keep track of developments over the summer. Alternatively, you could consider asking us to do it for you!