Article by Stanley Dencher, Senior Technical Editor, CCH Information. This article appeared in the June 2005 issue of Tax Adviser.
Background In Halifax plc, construction services were routed through ‘special purpose companies’ to improve the group’s VAT recovery. The tribunal decided that such planning is a counter-economic activity. It disregarded the transactions undertaken by the ‘special purpose companies’ because supply and activity under Directive 77/388, the sixth VAT directive, do not apply to such transactions. Thus, the construction services were supplied direct to the end user, which could recover only part of the VAT charged on the construction services.
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