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BAA Ltd v Revenue and Customs Commissioners - [2010] UKFTT 43 (TC)
A large log-jam of cases had formed behind the lead case of BAA Ltd v Revenue and Customs Commissioners. This log-jam will now be cleared following the decision in BAA’s favour by the First-tier Tax Tribunal. The Tribunal held that that BAA is entitled to recover the input VAT which had been incurred on the costs of the acquisition by a consortium led by Ferrovial, the Spanish infrastructure group on the acquisition of all the shares in BAA plc by the consortium in June 2006. The principle at stake was the recoverability of VAT incurred by a large number of other holding companies which had taken part in takeovers and share sales in recent years. Because of the number of cases affected by the decision, tax at stake is put at £100-200 million.
BAA was represented in the appeal by barrister David Southern of Temple Tax Chambers. His previous VAT win in the House of Lords in Fleming (T/a Bodycraft v Revenue & Customs Commissioners [2008] STC 325) is estimated to have cost the taxman £13.1 billion.
Notwithstanding the sale of Gatwick Airport forced by the Competition Commission, BAA remains the key player in the UK airport sector. The case arose from the £12 billion takeover of BAA plc in 2006.
Key to the Tribunal’s decision was the finding that the Ferrovial consortium did not aim to acquire the BAA shares and stop there. The consortium wanted to follow through, form a new holding company and take over the strategic direction of the business as a long-term project, with a view to developing and enhancing the performance of the airport sector. This meant that there was economic and legal continuity, so as to enable the input tax to be followed through and attributed to the output activities of the BAA group.
The case involved
· taking the Tribunal through the voluminous documentation produced to accomplish the takeover and its refinancing,
· reviewing the extensive European Court decisions on this issue
· Looking at how the costs of the takeover had been dealt with in the group accounts
· hearing evidence from the leading representatives of Ferrovial and BAA who had taken part in the planning and execution of the takeover, and overseen the subsequent reorganisation and refinancing of the group’s business.
The case thus deals with the central issues of holding companies and VAT, emphasises the wide scope of VAT and the wide scope of recovery by businesses, so as to ensure that the consumer does not have to pay both actual VAT and hidden VAT.
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Supreme Court says HMRC Guidance “Clearly Wrong”
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Press Release
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On 3rd February the Supreme Court gave Judgment in Grays Timber Products, the first tax case to be heard by the Supreme Court and the first case concerning employee share awards under the rules introduced in 2003.
In refusing the taxpayer’s appeal Lord Walker described the Revenue’s guidance published in 2003 as being, on HMRC’s own case “clearly wrong”. He also described the 2003 amendments as being “in anything but plain English”, and that he was “left in real doubt as to whether Parliament has in Part 7 of ITEPA 2003, enacted a scheme which draws a coherent and consistent distinction between intrinsic and extrinsic rights attaching to “employment related securities.”
Michael Sherry, Counsel for the taxpayer commented, “It is regrettable that HMRC argued this case contrary to its own clear guidance, and that the Supreme Court did not find that guidance authoritative.”
For further information contact Michael Sherry at Temple Tax Chambers, 0207 353 7884 or michael.sherry@templetax.com.
For the Supreme Court Judgment in Gray’s Timber, click here.
For further information about the case, click here.
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Landmark tax case on market value
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Grays Timber Products Limited v HMRC was heard by the new Supreme Court on 14th/15th December 2009.
The Appellant was represented by Michael Sherry leading Alun James, both of Temple Tax Chambers.
This was the first tax appeal before the Supreme Court and the first appeal from the Court of Session to the Supreme Court, and also the first United Kingdom tax case to be filmed.
It was also the first case concerning Part 7 of the Income Tax (Employment and Pension) Act 2003 and the first case concerning ascertainment of market value in a tax context to reach this level since Lynall v IRC [1976] AC 680, in 1975.
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"Image Rights and Tax"
&
"Agents Regulations - The New Dual Representation Regime"
Richard Bramwell QC will address the Chief Finance Officers of the Premier League Clubs on the above topics on 25 September 2009
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Click here for Richard Bramwell's article on HMRC's replacement for IR20, "Does HMRC 6 have the Xfactor?" in September's issue of Tax Adviser
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Schwarz on Tax Treaties has just been published by CCH along with their Annotated UK Double Tax Treaties (Book 2009) of which Jonathan Schwarz is consultant editor.
For details click here.
http://www.cch.co.uk/schwarz
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The 3rd edition of Tax Indemnities and Warranties co-written by Philip Ridgway has been published by Tottle Publishing.
For further details click here
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