A holding company is a company that acquires and holds shares in one or more subsidiary companies. Some holding companies hold shares in subsidiaries and receive dividends but play no part in the management of the subsidiaries, while other holding companies are actively concerned with the management of their subsidiaries.
When a holding company incurs professional costs (deal fees) in the course of a proposed or actual acquisition or sale of a company it is necessary to consider to what extent, if any, the deal fees qualify for exemption from VAT under VATA 1994, Sch 9, Group 5. Item 5. To the extent that the deal fees do not qualify for exemption from VAT the deal fees will be subject to VAT at the standard rate. Where VAT has been correctly charged on deal fees and other costs it will be necessary to consider to what extent, if any, the VAT can be recovered as input tax.
One category of deal fees is the cost of intermediary services supplied to
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