The Supreme Court has today handed down judgment in Airtours Holidays Transport Limited v HMRC. Owain Thomas QC (in his first appearance as a silk) and Matthew Donmall persuaded the majority of the Supreme Court that Airtours had no right to deduct as input tax, VAT incurred on professional fees which it paid to PWC in the course of a major restructuring of its debt.

The Supreme Court has held, upholding the majority of the Court of Appeal, that the services in question were supplied by PWC to the banks to whom Airtours was indebted and that on a correct construction of the contractual arrangements, Airtours’ role was simply to provide third party consideration for that supply.

This is an important case where the Supreme Court has recognised the limits of the domestic line of authority exemplified by Redrow v CCE and given guidance as to the correct approach to apply in cases where one party pays for services supplied to another party.

Read the judgment here.