BAA’s victory over HMRC at a recent VAT tribunal is set to cost the exchequer £100m as other companies claim back VAT on the cost of buying and selling subsidiaries.
The UK airport operator recently won an appeal regarding the £6.7m VAT bill incurred on legal fees and other costs in relation to its takeover by Spanish infrastructure group Ferrovia in 2006.
HMRC had argued that the VAT on these costs could not be recovered because there was no firm link between the fees and the taxable activities of BAA and its associated companies. The tribunal decided that VAT recovery should be allowed because Ferrovia had subsequently become part of BAA’s existing VAT group registration and this was enough to support the connection.
The decision follows a landmark £1m...