VAT Cases On Deal Fees and Grouping: BAA Is Denied £6.7m Deduction for Deal Costs; Non-Taxable Persons May Join VAT Groups

Sullivan & Cromwell LLP - 18 April 2013

BAA has been defeated in the English Court of Appeal in its attempt to recover £6.7m of value added tax incurred on deal costs during a successful takeover bid. The case is significant for UK-based financial buyers: it shows how important it is to plan for VAT recovery early and to make sure there is evidence of the bidding company’s intentions.

More significantly – and more welcome to taxpayers – the European Court of Justice has decided that member states may allow non-taxable persons (such as pure holding companies) to be members of VAT groups.