Source: All England Reporter
Publisher Citation: [2001] All ER (D) 277 (Feb)
Court: Court of Justice of the European Communities (Fifth Chamber)

Judges Edward (acting as President of the Fifth Chamber), Jann and Sevón (Rapporteur)

Judgment Dates: 22 February 2001


European Community - Value added tax - Input tax - Transfer of a totality of assets - Deduction of input tax on services used by transferor for purposes of transfer - Goods and services used for purposes of taxable person's taxable transactions - Sixth Council Directive (EEC) 77/388, arts 5, 17.

The Case

Where a member state had made use of the option in art5(8) of the Sixth Council Directive (EEC) 77-388 (on the harmonisation of the laws of the member states relating to turnover taxesCommon system of value added tax: uniform basis of assessment), so that the transfer of a totality of assets or part thereof was regarded as not being a supply of goods, the costs incurred by the transferor for services acquired in order to effect that transfer formed part of that taxable person's overheads and thus in principle had a direct and immediate link with the whole of his economic activity. If, therefore, the transferor effected both transactions in respect of which value added tax (VAT) was deductible and transactions in respect of which it was not, it followed from art17(5) of the Sixth Directive 77-388 that he could deduct only that proportion of the VAT which was attributable to the former transactions. However, if the various services acquired by the transferor in order to effect the transfer had a direct and immediate link with a clearly defined part of his economic activities, so that the costs of those services formed part of the overheads of that part of the business, and all the transactions relating to that part of the business were subject to VAT, he could deduct all the VAT charged on his costs of acquiring those services.

Practice Areas

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