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VAT focus: AES and the Redrow principle

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Following several decisions of the CJEU, formerly the ECJ, there was concern that Redrow did not sit comfortably with CJEU jurisprudence. However,  in AES-3C Maritza East 1 (Case C-124/12), the CJEU has articulated the same principles. The starting point for both AES and Redrow appear to be not to focus on what the payment is for, but rather whether the nature of the expenditure is such that it has a direct link (in a cost component way) to the economic activity of the taxpayer’s business. If the answer is yes, identifying precisely what was supplied does not really matter. The VAT should be recoverable.

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