BB/21C/05 VAT—further clarification of the VAT position of share issues following the European Court of Justice's decision in Kretztechnik
Business Brief, Issue 21. 23 November 2005
Business Brief 12/05 explained HM Revenue and Customs' position on the VAT treatment of share issues and subsequent input tax recovery, following the decision in Kretztechnik A.G. -v- Finanzamt Linz (Case C-465/03) (Part V11). This Business Brief article contains additional guidance, with specific implementation dates underlined.
Revised treatment of share issue transactions
Business Brief 12/05 advised that companies making a new issue of shares to raise capital for their business, in circumstances identical to those in Kretztechnik's case, were not making any supply but were entitled to treat the VAT on the costs of the issue as input tax. Companies that make both taxable and exempt supplies should recover a proportion of the input tax in accordance with their partial exemption method that applied at the time of the issue.
The following guidance explains the VAT position of share transactions where the circumstances differ from those in Kretztechnik.
Transactions involving issues of other types of shares
Businesses may issue shares of different types. For example, there may be an issue of preference shares, a special rights issue, a bonus issue or issue of scrip dividends. Kretztechnik principles are applicable to all such share issues and these are now to be regarded as non-supplies for