Holding company vat on management fee

Holding company vat on management fee

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Hello!

My client runs a parent company with 2 fully owned subsidiaries.  The subsidiaries provide residential and care services and are exempt from vat registration. However, the parent charges a management fee to the 2 subsidiaries.  Should the parent be charging vat for these services or can it piggy back exemption from the fact that the overall services in the group are exempt?

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By spidersong
05th Dec 2011 14:39

Group Registration

If it's a group VAT registration then it can ignore inter-group supplies.

If it's not then I'm afraid it's looking at charging VAT; unless you've got a convincing argument that the services that it itself supplies are exempt.

Also if it's not then it may want to look at group registration, unless the (presumably partial) loss of Input VAT that the managment co will suffer will offset the gain in not charging VAT to other members.

 

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By DMGbus
06th Dec 2011 08:41

What does holding company provide?

If all that the holding company does is make a management charge, having no costs itself other than remuneration of common directors, then there is, for VAT purposes, no supply made and consequently no VAT due on the management charges.

On the other hand, if staff are employed (over and above common directors), facilities provided such as accounting function or provision of  other services (other than just common directors) then a supply is being made and a potential VAT liability arises on such a supply.

 

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