In Bluejay Mining plc vs HMRC [2020] TC07947 the First Tier Tribunal (FTT) allowed the recovery of input VAT incurred by a holding company.

  • Bluejay Mining plc (Bluejay) is a UK company listed on the Alternative Investment Market (AIM) operating in the mineral exploration and mining industry.
  • Under its business model, Bluejay would:
    • Identify suitable mining projects, before raising funds from shareholders.
    • Obtain the necessary exploration licence via a locally resident subsidiary company.
    • Put together a technical team to carry out viability fieldwork, providing technical services to the local subsidiary.
    • Loans funds to the subsidiary to pay for these services.
  • The loans made by Bluejay were repaid if and when the project was successful or when the licences and assets of the subsidiary were sold.
  • Between 2012 and 2017 HMRC denied Bluejay credit for input VAT totalling £552,249 on the basis that, as a holding company, Bluejay:
    • Was not making taxable supplies to its subsidiaries for consideration, and/or
    • Was not carrying on an economic activity.
  • Bluejay appealed to the FTT.

The FTT allowed Bluejay’s appeal, finding that:

  • Bluejay was providing services to its subsidiaries for a specified consideration of 115% of the cost of providing those services.
  • The loan agreements and the contracts for services were two separate contracts and so payment of the invoices for services was not contingent on the successful outcome of the projects.
    • The invoices were considered to have been paid when they were added to the loan account.
  • Had the invoice payments been contingent on the successful outcome of the projects it would not mean that the services were not provided for consideration.
  • Bluejay was carrying on an economic activity when supplying technical services to its subsidiaries.

Useful guides on this topic

Management re-charges (holding companies)
When are intercompany charges subject to VAT? What rate of VAT applies to an intercompany charge? Is an intercompany charge a supply for VAT? Is there VAT on an intercompany payment for group relief?

Groups (VAT)
What is a VAT group? Who can form a VAT group? What are the benefits of a VAT group?

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Bluejay Mining plc vs HMRC [2020] TC07947

 

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