On 2 May 2013 the High Court determined that Ryanair was not entitled to recover VAT incurred on expenditure relating to its unsuccessful bid to acquire a 100% shareholding in Aer Lingus in October 2006. The Court found in relation to the bid that Ryanair was not a taxable person carrying out an economic activity despite Ryanair’s stated intention to provide management services to Aer Lingus in the event of a successful bid. It is not clear at this stage whether Ryanair will appeal to the Supreme Court.

While the decision was very much based on the specific circumstances, it highlights the need to consider VAT recovery entitlement when making share acquisitions. The potential to recover VAT can depend on a number of factors including whether a pure holding company is the acquisition vehicle, whether management services will be provided and whether VAT grouping is put in place. Early planning could reap rewards.