Press Room
Technology businesses threatened by new European Commission
rule on VAT
Technology businesses are facing an unwelcome VAT bill if a
European Commission (EC) proposal to change the rules for VAT group
registrations is implemented, warns Grant Thornton UK LLP.
The Commission is concerned that, under current UK policy, passive
holding companies can join a VAT group registration and
consequently enjoy the recovery of VAT on costs which would
otherwise not be recoverable. Under the Commission's proposal, a
non-trading holding company would be excluded from joining a VAT
group (or registering as a single registration) and any VAT that it
incurred would be an additional cost.
Niki Dixon, Head of Technology at Grant Thornton says, "This change
will increase real costs for many businesses in the sector.
Technology companies incur substantial VAT costs when they seek new
investment or funding. Technology companies will be hit by this
rule as many use passive holding companies as investment vehicles
which are kept separate from the trading business. Currently these
holding companies are brought into VAT groups so they can recover
the VAT on costs incurred, such as fees for share issues.
"If the EC proposal is enforced, it will increase the real cost of
raising money at a time when every penny counts. Businesses should
consider how the change would affect their VAT recoveries and
take steps now to protect their position. Those that do not will
simply sleep walk into problems."
The EC has given the UK two months to amend its policy.*
* EC announcement 20 November 2009
http://europa.eu/rapid/pressReleasesAction.do?reference=IP/09/1768&format=HTML&aged=0&language=en&guiLanguage=en
For further information, please contact:
Lisa Ritchie, Grant Thornton press office, 020 7728 2208 or via
email on lisa.ritchie@gtuk.com