It looks highly likely that VAT charged on costs
associated with a share issue can be recovered, if a recent
Advocate General's opinion in the Kretztechnik case (Case 465/03)
is to be upheld by the European Court.
What does this mean for you?
If you are
a business that has issued shares in the last 3 years, you should
put in a protective claim for VAT recovery now in relation to
expenses paid in connection with share issues. This will then
preserve your ability to recover VAT for external adviser costs
from the past 3 years if the court follows the Advocate
What about bond issues?
Whilst you may have been aware that VAT is likely
to be recovered against the issue of shares, you will not be aware
that a second legal challenge is under way in relation to expenses
paid in connection with the issue of debt securities. CMS Cameron
McKenna's experienced and successful VAT litigation team is
currently conducting litigation on this issue. If the same
principles which the Advocate General has applied in Kretztechnik
can be applied in relation to the raising of certain debt capital,
e.g. bond issues, VAT incurred on these expenses will be
recoverable in the same way as for share issues.
What sort of savings can be made?
For example, if your business can recover all of
its VAT for every £1 million spend on external adviser fees you
would be able to recover £150,000 in VAT. This could be VAT on
the services of lawyers, accountants, property agents, valuers and
any other adviser who has charged VAT.
What type of business does this apply
Any business that can recover VAT, in particular,
the VATable sector businesses such as manufacturing, utilities,
construction, retailers and entertainment. Even banks,
insurance and other exempt businesses often have a significant
Who is this relevant to?
Finance Directors, Tax Managers and VAT
Why CMS Cameron McKenna can help?
Members of our VAT litigation team (led by Peter
Mason – formerly Head of VAT at Abbey National) advised on
the successful Abbey National case that established the principle
that costs incurred in relation to "non-supplies" are linked to the
business as a whole and recoverable to the extent the business
makes taxable supplies. Peter is currently leading the team
conducting the debt securities litigation referred to
above. We are, therefore, aware of all the issues and likely
We can advise you on the categories of debt
security in relation to which you can make a protective claim and
so protect your rights in relation to the 3-year cap.
We are happy to talk to you about how to put
together your claim to maximise the likelihood of success. We
know that this is a complex area and that by getting the right
advice on how to submit the claim you stand the best chance of