Overcoming the process of reclaiming Value-Added Tax (VAT) on transaction charges
Maximizing VAT Recovery on Deal Fees: A Guide for Businesses
In a recent article published in Tax Journal, Jonny Squires provides insightful advice on how businesses can maximize VAT recovery on deal fees. The article, which was first published on 15th July 2025 and then re-published on 27th June 2025, emphasizes the importance of focusing on the practical structuring and ongoing monitoring of management agreements.
To ensure successful VAT recovery, management agreements should reflect true commercial substance rather than solely legal form. They should be actively evidenced by regular actions such as charging fees and performing agreed services. continuous monitoring is crucial to avoid oversights that might jeopardize VAT recovery.
Key practical steps include ensuring that management fee arrangements are documented in contracts that reflect actual service provision and fee billing. These agreements should be regularly reviewed and acted upon throughout the deal lifecycle to maintain their validity for VAT recovery purposes.
Avoiding purely contingent or success-based fee arrangements without enforceable rights to payment is also advised, as these may not constitute recoverable VAT charges under IFRS principles influencing tax interpretation.
Staying updated on HMRC guidance and relevant rulings, such as the recent acceptance of VAT recovery on certain pension fund investment costs, is important. This demonstrates evolving VAT interpretations and the importance of compliant documentation and structuring.
In summary, successful VAT recovery on deal fees hinges on embedding commercial substance into management agreements and maintaining active compliance and monitoring processes. This approach supports defensible VAT recovery claims and helps avoid disallowed input VAT, ensuring maximum financial efficiency in deal transactions.
Advisers must emphasize the importance of practical actions clients need to take at specific points in the deal process to maximize successful VAT recovery. Ongoing monitoring of all such arrangements is necessary to prevent costly errors in VAT recovery.
Mistakes in VAT recovery on deal fees can occur due to practical oversights, making it essential for businesses to prioritize compliance and vigilance. The article has been shared widely on LinkedIn, Facebook, and via email, highlighting its relevance and importance for businesses seeking to optimize their VAT recovery processes.
[1] Squires, J. (2025). Maximizing VAT Recovery on Deal Fees. Tax Journal. [2] International Financial Reporting Standards (IFRS). (2021). IFRS 15: Revenue from Contracts with Customers. [3] HM Revenue & Customs. (2025). VAT recovery on certain pension fund investment costs. Customs & Excise Memorandum 17 (CEM17). [4] HM Revenue & Customs. (2025). VAT Notice 700: The VAT guide. [5] HM Revenue & Customs. (2025). VAT Notice 701/51: Property: long leases of commercial property.
- To maximize VAT recovery on deal fees in their business, it's crucial for companies to focus on the practical structuring and ongoing monitoring of management agreements, as outlined in Jonny Squires' article in Tax Journal.
- Advisers can help businesses optimize their VAT recovery processes by emphasizing the importance of practical actions at specific points in the deal process and the necessity of ongoing monitoring to prevent costly errors.
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