27 Monday Jun 2016
This case concerns the input VAT recovery on services provided by PwC and paid for by Airtours Holidays Transport Ltd. In late 2002, Airtours, which was in serious financial difficulties, was advised to commission an accountant’s report to satisfy its lenders that their restructuring and refinancing proposals were financially viable. PwC produced a report addressed to the lenders, setting out the original terms of its appointment alongside the applicable terms and conditions. The report detailed that Airtours would pay for the production of the report and any related work. Airtours paid PwC the output tax on the payments and subsequently sought to recover this VAT as input tax. HMRC challenged Airtours’ capacity to do this, asserting that while Airtours had benefitted from the commercial contract, the service supplied was to the lenders, not Airtours.