Share Issues - Get That VAT!

The Advocate General recently dropped a bombshell when he gave his opinion in a European Court of Justice (ECJ) case concerning the deductibility of the VAT on advisor’s fees relating to a share issue by an Austrian company. The rule for VAT has always been that the relevant input VAT is not an allowable deduction, because the issue of shares by a company is an exempt supply for VAT purposes.

However, in the opinion of the Advocate General, an issue of shares is not a supply at all for VAT purposes and therefore advice relating to a share issue is related to the economic activity of the company as a whole and VAT is therefore recoverable.

The Advocate General’s opinion was confirmed by the ECJ on 26 May. Companies which have issued shares in the last three years should write to HM Revenue and Customs (HMRC) and make a claim for any input VAT they did not claim because it was thought that it was not reclaimable. Note that claims for repayment of overpaid VAT are time limited to three years, so if you have issued shares in the relevant period and delay your claim, you could miss out on any refund.

There is guidance on the HMRC website in Business Brief 12/05 (June 2005).