It is not an everyday occurrence for a competent tax administration to announce a U-turn and withdraw from stated policy. This is precisely what happened on 16 December 2005 when the United Kingdom Revenue & Customs (HMRC) formally withdrew a policy change that was set to be introduced from 1 January 2006 and would have made it impossible for non-UK businesses to recover VAT on hotel and similar services, if the related invoices were issued in the name of their employees. In this article, the author examines the factors influencing HMRC's policy change and the events leading up to the retraction, while providing commentary and opinion on the underlying technical and legal arguments.