revenue

Professional fees incurred on issue of shares issue of shares constituting supply of services taxpayer not entitled to deduct input VAT on feesTrinity Mirror Plc (formerly Mirror Group Newspapers Ltd) v Commissioners of Customs & Excise: CA (Pill and Chadwick LJJ and Wright J): 24 January 2001To finance the expansion of its business, the taxpayer issued shares and invited the public to subscribe.

Shares were issued to both EU and non-EU residents.The taxpayer was entitled to recover 100% of input tax on its overheads, including those which did not relate to supply of services, but input tax attributable to exempt supplies was not recoverable.

The commissioners ruled that the issue of shares constituted a supply of services and that, since that was an exempt supply, that part of the VAT incurred in respect of professional fees in connection with the issue of shares to European Union residents was irrecoverable.

The VAT tribunal dismissed the taxpayers appeal.

Mr Justice Lightman upheld the tribunals decision.

The taxpayer appealed.David Milne QC and Greg Sinfield, solicitor (instructed by Lovells) for the taxpayer.

Melanie Hall (instructed by Solicitor, Customs and Excise) for the commissioners.Held, dismissing the appeal, that the correct approach was to ask whether, in the light of the definitions in Council Directive (77/388/EEC) and the Value Added Tax Act 1994, something done (under section 5(2) of the 1994 Act) was, or was to be treated as, the supply of goods or services; that, if it was, the consideration obtained by the supplier for that something done might be described as part of his turnover for VAT purposes; and that the issue in the United Kingdom by a taxable person of its own shares for the purpose of financing the expansion of its business constituted a supply of services for the purposes of the 1994 Act.