The Court of Appeal has dismissed BAA’s appeal against the Upper Tribunal’s decision in BAA Limited v HMRC [2013] EWCA Civ 112, that VAT input tax on professional fees incurred by a bidding company in the course of a takeover of a target company (BAA) was irrecoverable. The Court of Appeal concluded that both the First-tier Tribunal and the Upper Tribunal were wrong in concluding that the acquisition vehicle was carrying on an economic activity at the time that the input tax on professional fees was incurred. At that time, the acquisition vehicle’s only intention was to acquire the shares in BAA. While that was an act with economic consequences, it was not carrying on an economic activity for VAT purposes. The First-tier Tribunal had found no evidence that, at that time, the acquisition vehicle made, or intended to make, taxable supplies. This finding of fact was fatal to the contention that it was carrying on an economic activity.