On 3 May 2018, the Advocate General (AG) opined that VAT on professional fees incurred on a failed takeover bid was recoverable by the bidder. The case relates to Ryanair’s failed 2006 bid to takeover Aer Lingus (AL). Ryanair’s intention was to provide VAT-able management services to AL.

In the AG’s view, Ryanair could recover the VAT it had incurred as there existed the required “direct and immediate” link between the proposed share acquisition and Ryanair’s future taxable supplies. Where, as here, the intention was for the acquisition to extend/modify the taxpayer’s existing business this was sufficient for VAT recovery purposes. It did not matter that the bid in fact failed, and therefore no VAT-able supplies of management services were actually made.

If the ECJ follows the AG’s opinion it would appear that operating companies can recover VAT on acquisition costs (whether successful or not) without the need (or intention) to provide management services to the acquired subsidiary, provided the acquisition is (or would have been) a strategic one relating to an existing business.

The AG’s opinion can be viewed here.