TAXATION ; ;VAT professional advice prior to acquisition of company input tax recoverable only where sufficiently direct and immediate link with taxable economic activity ;RAP Group Plc v Customs and Excise Commissioners: ChD (Patten J): 9 November 2000 ;A VAT and duties tribunal held that the taxpayer could not deduct the input tax it had paid on fees to chartered accountants, a stockbroker and its solicitors in respect of work done by those professional advisers in relation to the taxpayers acquisition of the shares in W Plc. The taxpayer appealed on the basis that the input tax it had incurred was directly linked to the taxable supplies it would make as a result of the acquisition of W Plc. ;Rupert Anderson (instructed by Amanda Brown, Manchester) for the taxpayer. Peter Mantle (instructed by Solicitor, Customs & Excise) for the commissioners. ;Held, allowing the appeal in part, that the recovery of the input tax depended on whether the services the professional advisers provided were exclusively attributable to making an exempt supply (the issue of new shares in the taxpayer company) or were used in making both taxable and exempt supplies; that the court had to ask not what was the transaction with which the cost component had the most direct and immediate link, but whether there was a sufficiently direct and immediate link between the input tax paid and a taxable economic activity, which was a question of fact; that where input tax was incurred on services which were used for the purposes of an exempt supply that prevented the same inputs from being treated as a cost component of a subsequent output supply of taxable services; that nothing in the invoices received from the stockbroker or the accountants indicated that their services related to anything other than the issue of shares, an exempt supply; but that the invoice from the solicitors included items which were not attributable to the issue of shares, such as advising on the financing of the acquisition, preparing service contracts for the executive directors, preparing a due diligence report, investigating title to W Plcs real property and preparing papers for its AGM immediately following its acquisition; that the tribunal had been wrong to treat all the work done by the solicitors as being solely attributable to the issue of the shares; therefore, the taxpayer was entitled to deduct input tax on the solicitors invoice only. ; ; ;