News - tax cases

Correctly apportioned

The taxpayer company agreed with another company in the same VAT group it would carry out a development for the other company. The price was paid on the date of the development agreement as an advance payment. Four days after the amount was paid the taxpayer left the VAT group and registered separately for VAT. On completion the taxpayer invoiced the other company for some £10 million and accounted for VAT of £1.75 million. It had already claimed VAT of £4.94 million while it was in the same VAT group as the other company. While accepting that a proportion of VAT was deductible while the companies were in the same group   HMRC did not accept that the taxpayer was entitled to the VAT after it left the group so sought repayment of the balance £3.19 million.
The VAT tribunal allowed the company's appeal...