BAA’s recent victory over HMRC at a VAT tribunal could cost HMRC over £100m as other companies now attempt to claim VAT back from buying and selling subsidiary companies.
The UK airport operator won an appeal regarding a £6.7m VAT bill from legal fees in relation to its takeover by Ferrovia, a Spanish infrastructure group, in 2006.
HMRC argued that the VAT could not be claimed back as there was no definite link between the legal fees and the taxable activities of BAA and its associated companies.
However, the tribunal ruled that the claiming back of VAT should be allowed as Ferrovia then became part of BAA’s VAT group registration which proved a link.
The tribunal decision comes after a similar case last year when holiday operator MyTravel won an estimated £1m in a landmark case.
Tribunals against HMRC are becoming increasingly more popular showing that taxpayers are finally fighting back.
The decision is expected to have a huge impact for business whose VAT recovery claims are currently being challenged by HMRC.