The taxpayer had attempted to demonstrate that costs incurred by the parent in disposing of a subsidiary by a sale of shares, including valuation, negotiation and legal fees, represented part of the general overheads of its broader business. Accordingly, SKF had attempted to recover the input tax paid on those supplies.  

The Advocate General has concluded that share dealing can be an ‘economic activity’ (within the scope of VAT) where a shareholder’s involvement in the affairs of its holding go beyond that of a “mere shareholder”. However, the sale of those shares is still caught by Art 13B(d)(5) and should be considered an exempt supply for VAT purposes.  

The AG, following the decision in BLP, found that the “direct and immediate” link between the services and the exempt supply broke the VAT chain and were nonrecoverable. This is distinct from the situation in Kretztechnick where input tax paid on similar fees was found to be deductible because the issue of share capital was found to be outside the scope of VAT and the transactions only referable to business overheads.