UK confirms no EU VAT recovery without taxable supplies

Mon 25th Feb 2013

The UK has confirmed in a recent ruling that businesses not providing a taxable supply of goods or services are not entitled to recover VAT in costs.

The case concerned the holding company of British Airports Authority, which incurred professional advisory fees on the potential disposal of a subsidiary.

The Court of Appeal ruled that since BAA’s holding company was not performing an economic activity – providing a taxable supply – it was not entitled to recover UK VAT. This overturned the view of lower courts and tribunal that held the activities of the holding company were tied into those of the BAA, and therefore entitled to reclaim the VAT.