VAT on legal fees in share takeovers recoverable

VAT on legal fees in share takeovers recoverable

VAT on professional fees - including legal fees - arising from share-for-share corporate takeovers is recoverable, the High Court ruled last week, overturning the VAT tribunal.

The case involved industrial business RAP Group, advised by KPMG, which acquired Welpac by a share-for-share exchange.

Customs & Excise argued that VAT on the professional fees was not recoverable because it related simply to the issue of new shares.

KPMG countered that the fees also related to the acquisition of Welpac's shares and the VAT could be recovered as it involved other activities of the business.

KLegal, KPMG's associated law firm, led the case with the Big Five firm's VAT legal services team.

KPMG VAT partner Frank Sangster said: 'While the VAT involved in this case was fairly small, it establishes a crucial principle.

Larger businesses may be able to take advantage of this judgement to reduce the VAT costs of an acquisition and other corporate activity significantly.'