On 24 June 2010, the European Commission commenced infringement
proceedings against the UK and certain other countries alleging
that their VAT grouping rules do not comply with EU legislation.
The specific issue identified with the UK rules (and those in the
Netherlands, Ireland, Finland, Denmark and the Czech Republic) is
that they allow the inclusion of persons in VAT groups which do not
make any VATable supplies.
It is not clear when this issue will be heard by the ECJ and,
indeed, it is possible that the case may be settled without any
hearing. However, if the European Commission is successful, this
could adversely impact pure holding companies which would no longer
be able to join VAT groups to recover input tax. Where holding
companies make taxable supplies of, for example, management
services to their subsidiaries, they should be unaffected by these
proceedings. Groups should ensure that any such arrangements have
real substance and keep evidence of the services provided. Pure
holding companies may need to consider whether they could protect
their input tax recovery position by supplying management services
to their subsidiaries.
Please click on the links below for the other articles in
the July 2010 tax newsletter.
Contacts
John Watson
T: +44 (0)20 7859 1308
E: john.watson@ashurst.com
Richard Palmer
T: +44 (0)20 7859 1289
E: richard.palmer@ashurst.com
Ian Johnson
T: +44 (0)20 7859 1304
E: ian.johnson@ashurst.com
Alexander Cox
T: +44 (0)20 7859 1541
E: alexander.cox@ashurst.com
Paul Miller
T: +44 (0)20 7859 1786
E: paul.miller@ashurst.com
Simon Swann
T: +44 (0)20 7859 1882
E: simon.swann@ashurst.com
This newsletter is not intended to be a comprehensive review of
all developments in the law and practice, or to cover all aspects
of those referred to. Readers should take legal advice before
applying the information contained in this publication to specific
issues or transactions.