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HMRC v BAA Ltd (and cross-appeal)

In HMRC v BAA Ltd (and cross-appeal) (Upper Tribunal – 22 June) a large Spanish company (F) had arranged for the incorporation of a new company (AD) with the aim of making a ‘takeover bid’ for another company (B) which operated several British airports.

The bid was successful and AD incurred significant costs in relation to the acquisition. After the takeover AD joined B’s VAT group.

The representative member of the group (BL) claimed a deduction for input tax of more than £6 000 000 which AD had incurred in relation to the takeover.

HMRC issued an assessment to recover the tax on the grounds that there was no direct and immediate link between the supplies on which this VAT was incurred and any taxable supplies made or intended to be made by BL’s group.

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