VAT savings likely in share transactions
A recent High Court decision could result in companies involved in share transactions saving £100m through reclaimed VAT.
In a judgement earlier this month, RAP Group, a management services company, won its appeal against Customs & Excise, allowing it to deduct the VAT paid for the services of three professional advisors in relations to its client’s share acquisition of Welpac plc. Mr Justice Patten sited section 26 of the Value Added Tax Act 1994 in making his ruling.
Commenting on the consequences of this ruling, Lorraine Parkin, head of tax at RSM Robson Rhodes said: ‘The decision in the case of RAP Group will have a significant impact on the recovery of VAT.’
According to Parkin, in the case of acquisitions funded by share for share transactions, VAT not previously charged for on professional fees could now be recovered.
The High Court ruling applies only to VAT paid on fees relating to share acquisitions and does not apply to the issuing of shares.
Parkin said while it was likely that Customs & Excise would appeal the decision, businesses should consider making a claim for payment now, in order to protect their position.
Previously, Customs & Excise disallowed VAT being charged in any share for share transactions.
The Times report on RAP Group vs Commissioners of Customs & Excixes