Divergence in European Case Law: Implications of German and UK Approaches to Taxable Business

Contradictory Conclusions: The German Federal Court’s elevation of factual inevitability from a specific case to a general legal principle contrasts sharply with established case law, creating confusion in tax law interpretation.
Legally Unsound Developments: This shift in German case law, which disregards the clarity provided by the Sveda ruling, leads to problematic judicial second-guessing of business inevitability.
UK Perspective on Input Tax Recovery: In contrast, the UK Supreme Court’s ruling in Frank A Smart allows for input tax recovery based on the objective promotion of taxable business activities, regardless of direct necessity, resulting in a more favorable outcome for businesses.