BAA: Input Tax Recoverable for Share Acquisition Costs
Thursday March 18, 2010
A recent ruling means that companies involved in mergers or acquisitions where VAT recovery had previously been refused by HMRC might now be able to make a claim.
The First tier tribunal has released a decision in BAA Limited v HMRC [2010] UKFTT 43 finding that the company set up to acquire the BAA Group was able to recover input tax on costs related to the acquisition. The tribunal held that the costs went beyond acquisition and that the company was involved in the management of the BAA group. As the acquisition company joined the BAA VAT group it as able to use the taxable supplies made by other group members in deciding whether it carried on an economic activity and so were able to recover VAT.
HMRC argued that the deal costs related to the raising of finance for the acquisition and that the VAT did not relate to taxable supplies made by the group.
The decision is very good news for taxpayers. The ability to recover input tax incurred in corporate takeovers is a complex area and HMRC has often disputed VAT recovery. The costs involved in restructuring are frequently significant (£6.7 million in this case) so it is welcome to get confirmation that the costs are recoverable. However given the amounts of tax involved it is likely that HMRC will appeal the decision.
What should you do?
If you have had a restructuring in recent years where HMRC refused VAT recovery you should consider making a claim for VAT refused. The decision in BAA was based on specific facts but could apply in other cases. We would be happy to advise and to calculate and make claims on your behalf if appropriate.