AG Opinion: VAT Is Recoverable on Costs of Failed Ryanair/Aer Lingus Takeover
Advocate General (AG) Kokott has opined in C‑249/17 Ryanair Ltd v The Revenue Commissioners that input VAT incurred by Ryanair on costs in a failed takeover of Aer Lingus is deductible.
Ryanair made a bid to purchase a 100% shareholding of Aer Lingus in 2006. When the takeover failed, Ryanair tried to claim a deduction of input VAT paid on professional advisory fees incurred for the attempted takeover. The Irish revenue authority argued that Ryanair was not engaged in an economic activity in acquiring those professional services and refused Ryanair’s claim. The Irish Supreme Court asked the Court of Justice of the European Union (CJEU) whether VAT on Ryanair’s costs could be deducted.
It is the AG’s opinion that input VAT should be fully deductible in the context of a strategic takeover by an operating undertaking. The AG held that failure to proceed with the acquisition did not impact the VAT recovery position. Applying a functional analysis, the AG concluded that the ‘acquisition of a company’s entire share capital with the intention of bringing about a direct, permanent and necessary extension of the taxable activity of the acquiring company constitutes an economic activity’.
The AG took the view that VAT recovery should be allowed even if the costs were sustained by a pure holding company, without an operating business, if such a holding company had the intention to provide (management) services to the target company after the takeover. In this respect, the AG argued that the only decisive factor was the ‘intention to commence an economic activity for VAT purposes, supported by objective evidence’.
An Assessment to Tax is never ‘stale’, but it might be out of date: HMRC v Tooth
This article briefly discusses the key points arising out of the decision of the UK Supreme Court in HMRC v Tooth  UKSC 17. The case considered (1) whether a discovery assessment could become “stale” and (2) the meaning of the phrase “deliberate inaccuracy”.
VATA 1994 s.47, Agency, Onward Supply Relief, & Double Taxation
On 12 July 2021, the First-tier Tribunal (Tax Chamber) (“FTT”) released its decision in Scanwell Logistics (UK) Limited v HMRC  UKFTT 261 (TC), rejecting the taxpayer’s claim for onward supply relief (“OSR”).
Whilst OSR is now limited, post-Brexit, to goods imported into Northern Ireland for onward supply to the EU, the FTT’s discussion of agency under section 47 of the Value Added Tax Act 1994 (“VATA”) is of broader interest.
The case serves as a reminder of the significant financial consequences that can result from errors in tax planning, as Scanwell was ultimately held liable for £5.7 million in unpaid import VAT despite the fact that the imported goods almost immediately left the UK (which, if properly planned, could have meant Scanwell was relieved from liability to import VAT).
Draft Finance Bill 2022—tax avoidance measures
Helen McGhee, senior associate at Joseph Hage Aaronson LLP, considers the draft Finance Bill 2022 clauses published on 20 July 2021 in relation to tax avoidance and recent updates to the tax avoidance regime.
Getting Closer: A Global Minimum Tax on Corporations
On 1 July 2021, US Treasury Secretary Janet Yellen announced that countries representing over 90% of global GDP had agreed to a global minimum tax on corporations (“GMCT”). The GMCT seeks to put a floor on tax competition on corporate income through the introduction of a minimum corporate tax of at least 15%. Whilst certain elements give rise to positive expectations, some caveats should be noted. Much will depend on (1) the outcome of future political negotiations and (2) the detail of the drafting at international and national levels.
The DBKAG & K (CJEU) decision: an opportunity for investment funds?
On 17 June 2021, the European Court decided the joint cases K (C-58/20) and DBKAG (C-59/20) regarding whether the supply of certain services constituted the “management of special investment funds”, benefiting from the VAT exemption enshrined in Article 135(1)(g) of Council Directive 2006/112/EC.