Update-taxcase

VAT recovery

Land in which the appellant held a lease was compulsorily purchased. Reinstatement works were carried out to replace some buildings and the third appellant paid the contractors VAT. VAT returns were made in respect of these works and input tax repaid. HMRC later decided that the input tax should not have been deducted but did not pursue repayment.
The matter was transferred to the Land Tribunal which determined that the reasonable cost of equivalent reinstatement did not include the VAT that had been repaid. The appellants appealed.
The Court of Appeal said that the likelihood of the contingency that VAT would be recovered had to be assessed in the same way as any other contingency. The appellant had to proved that there was a real risk that the VAT would have to be repaid but it had not done so.
The appeal was dismissed.
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