Technology businesses face the threat of an extra VAT bill if new European proposals to change the rules for VAT group registrations come into play, Grant Thornton has warned. As current UK policy stands, passive holding companies can join a VAT group registration and then recover VAT on costs that would not have been recoverable otherwise. This has caused concern at the European Commission. The Commission is therefore proposing that non-trading holding companies are excluded from joining a VAT group - or registering as a single registration - and any VAT incurred would be an additional cost. 'This change will increase real costs for many businesses in the sector,' said Niki Dixon, head of technology at Grant Thornton. '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.' He added: 'Currently these holding companies are brought into VAT groups so they can recover the VAT on costs incurred, such as fees for share issues.' Dixon advised companies to consider how the change would affect their VAT recoveries and take steps now to protect their position.