Improved prospects

Entitlement to recover input tax on supplies

In 2002 Airtours had financial problems and approached some financial institutions to refinance its borrowings. Along with the institutions and PwC it entered into a tripartite agreement retaining PwC to carry out a review of the business with Airtours responsible for the consultancy’s fees expenses and disbursements.

Airtours claimed the input tax on the costs in its VAT returns. HMRC refused the claim. The First-tier Tribunal allowed the taxpayer’s appeal but the Upper Tribunal overturned that decision and the Court of Appeal dismissed Airtours’ subsequent appeal. The matter progressed to the Supreme Court.

Lord Neuberger said for the VAT charged by PwC and paid by Airtours to be reclaimable as input tax it must be ‘VAT on the supply to [Airtours] of any goods or services’. This gave rise to two issues. The first was whether PwC had...