Norseman Gold plc (Norseman) appealed against a decision by HMRC to block the recovery of input VAT incurred in relation to the provision of supplies that were not deemed to constitute economic activity with the result that VAT could not be recovered on associated costs. Norseman is a UK-based holding company of a corporate group that has two principal subsidiaries; Davos Resources Pty Ltd (DRPL) and Norseman Gold Pty Ltd (NGPL). DRPL held a license that allowed it to explore an area of Australia for minerals and so therefore set out to raise capital by selling Norseman shares to investors. The mining operations themselves were undertaken by Central Norseman Gold Corporation Ltd (CGNC and to whom NGPL was the parent) but were done so under Norseman's direction who also provided the necessary funding. At the point of VAT registration Norseman intended to re-charge running costs that incurred in relation to the subsidiaries in the form of management charges although this did not happen immediately as the subsidiaries were making losses. It was surmised by the tribunal that, in order for input tax to be recovered on costs, they must relate to an onward taxable supply and although Norseman held the intention to make taxable supplies for a consideration, the hope of payment in the future was not a sufficient basis to recover input tax as an intended trader and so Norseman were not entitled to recover input VAT recovery. In all likelihood Norseman would have been able to substantiate VAT recovery if it had implemented certain procedures at the outset and clearly documented these procedures. Please do not hesitate to contact us should you wish to discuss the recovery of VAT incurred by holding companies in further detail.
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