Expenditure on public infrastructure: recent VAT and direct tax developments

The opinion of the advocate general to the CJEU in Iberdrola (Case C-132/16) casts doubt on input tax recovery in respect of expenditure on public infrastructure works as a condition of planning consent, contrary to the position in the UK taken by HMRC and stated in VAT Notice 742. Issues may also arise from a direct tax perspective following the Court of Appeal decision in Blackwell, which held that certain expenditure did not reduce the chargeable gains on disposal of an asset because the expenditure was not reflected in the ‘state or nature’ of the asset at the time of the disposal.