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Recovering input tax on professional services in BAA and Airtours

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The Court of Appeal has recently denied VAT recovery on costs associated with corporate restructuring and/or refinancing deals. However, the court has given some helpful guidance on the recovery of input tax and the specific facts of these cases may mean their impact is limited. In BAA, there was no evidence supporting the taxpayer’s intention to make taxable supplies at the time the supplies in question were made. In Airtours, the Court of Appeal’s reasoning seems to require contracts to be reworded to expressly engage the service provider to produce a report on behalf of the entity refinancing and to require the service provider to provide certain services to the banks.

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