UK – HMRC publish internal guidance on VAT recovery by Holding Companies

I wanted to alert you to the final published guidance issued by HMRC on the VAT recovery of holding companies.  The final internal guidance has confirmed when VAT recovery on acquisition costs should be possible, which is in line with the previous transaction cost VAT advice provided by PwC.However, it has also confirmed that VDD VAT costs can also be recoverable in certain circumstances, which is a significant change in policy.

Please find the final published guidance HERE.

Therefore, the main change that may be relevant to you is that HMRC have stated: ‘The VAT on costs incurred by the target of an acquisition, such as vendor due diligence costs, may also be deductible provided it can be shown that the target is the recipient of the supplies in question and those supplies were received for the purposes of the business carried out by the target’. This should apply to previous VAT costs incurred as well as VAT costs incurred on VDD’s going forward.

Therefore, if in the last four years VAT on VDD costs has not been recovered by target businesses being acquired, there could now be an opportunity to make a claim to HMRC for this VAT.

If you need help with dealing with HMRC in respect of claims for VAT recovery on transactions costs please contact David Denyer on or Iain Rawlings on


Bildquelle: Ingelotte  /

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