VAT recovery on acquisition costs: lessons to be learned
The Court of Appeal has rejected BAA’s claim for recovery of input tax incurred on professional fees invoiced to a company that acquired it and that subsequently became a member of its VAT group. This case reinforces the lessons about the steps that need to be taken to enable VAT on takeover costs to be recovered. There are significant traps for the unwary.
Airport Development and Investments Limited (ADIL) had been formed as a bid vehicle for the takeover of BAA plc and its subsidiaries. BAA and its subsidiaries were part of a VAT group at all times. ADIL received advice from investment banks and lawyers in connection with the share acquisition and incurred significant input tax on the costs of that advice. ADIL became a member of the BAA VAT group nearly four months after the takeover completed. The representative member the VAT group, BAA, sought to reclaim the input tax which ADIL had incurred, on the group’s VAT return. The group made taxable supplies.
It was agreed by all parties that, to reclaim the VAT, ADIL had to show that at the relevant time, i.e. when it incurred the VAT, it was carrying on an economic activity, and that it was a taxable person for VAT; and that the VAT on the costs had a “direct and immediate link” to the taxable supplies of the BAA VAT Group of which ADIL subsequently became a member…
If you are registered and logged in to the site, click on the link below to read the rest of the DLA Piper briefing. If not, please register or sign in with your details below.
Sign in or Register to continue reading this article
It's quick, easy and free!
It takes just 5 minutes to register. Answer a few simple questions and once completed you’ll have instant access.Register now
Why register to The Lawyer
In-depth, expert analysis into the stories behind the headlines from our leading team of journalists.
Identify the major players and business opportunities within a particular region through our series of free, special reports.
Receive your pick of The Lawyer's daily and weekly email newsletters, tailored by practice area, region and job function.
More relevant to you
To continue providing the best analysis, insight and news across the legal market we are collecting some information about who you are, what you do and where you work to improve The Lawyer and make it more relevant to you.
News from DLA Piper
News from The Lawyer
Briefings from DLA Piper
The Australian Taxation Office released a draft ruling on the Goods and Services Tax treatment of bitcoin transactions on 20 August 2014.
DLA Piper’s ‘Life sciences: patent extension strategies and antitrust global update’ video covers global antitrust and competition issues including product hopping and reverse payment patents.
Analysis from The Lawyer
Cross-border work and political tensions are dominating this year’s entries for Finance Team of the Year at The Lawyer Awards.
Regulators are ramping up the pressure in the aftermath of recession, leaving firms to compete for compliance and restructuring work