In Danesmoor v HMRC [2015] UKFTT 294 (15 June 2015), the FTT found that a company could not deduct input tax incurred on fees charged by advisors.
The issue was the VAT treatment of fees charged by Dickinson Dees solicitors and KPMG to Danesmoor in relation to a major restructuring involving the insertion of a new holding company. The question was whether the advice had been provided to Danesmoor or to its shareholders.
The FTT found that although the engagement letters had been entered into with the company, the economic reality was that the company had decided, before the engagement of the advisers, that it wanted to undertake a restructuring exercise. It was not seeking advice on how to restructure, but advice on the tax implications for the shareholders and legal services connected with the implementation of the restructuring.
The FTT concluded that the payment by Danesmoor for the tax advice and legal services given to the shareholders was an added inducement to persuade them to sell their shares, in accordance with the proposal put forward.
The appeal must therefore fail, on the basis that the services had not been provided to Danesmoor. In any event, the services had not been provided for the purpose of Danesmoor’s business.
Why it matters: Although the advice had been provided in connection with the restructuring of the company and paid for by the company, the FTT found that the services had not been provided to the company.
In Danesmoor v HMRC [2015] UKFTT 294 (15 June 2015), the FTT found that a company could not deduct input tax incurred on fees charged by advisors.
The issue was the VAT treatment of fees charged by Dickinson Dees solicitors and KPMG to Danesmoor in relation to a major restructuring involving the insertion of a new holding company. The question was whether the advice had been provided to Danesmoor or to its shareholders.
The FTT found that although the engagement letters had been entered into with the company, the economic reality was that the company had decided, before the engagement of the advisers, that it wanted to undertake a restructuring exercise. It was not seeking advice on how to restructure, but advice on the tax implications for the shareholders and legal services connected with the implementation of the restructuring.
The FTT concluded that the payment by Danesmoor for the tax advice and legal services given to the shareholders was an added inducement to persuade them to sell their shares, in accordance with the proposal put forward.
The appeal must therefore fail, on the basis that the services had not been provided to Danesmoor. In any event, the services had not been provided for the purpose of Danesmoor’s business.
Why it matters: Although the advice had been provided in connection with the restructuring of the company and paid for by the company, the FTT found that the services had not been provided to the company.
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