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RBS was the representative member of a group of companies making taxable and exempt supplies.
If part of the input tax for which RBS was liable could not be wholly attributed to either taxable or exempt supplies it was referred to as residual input tax.
In May 2002 a partial exemption special method and approval agreement relating to the residual input tax was agreed.
It provided that where the method applying to a sector required recovery of input tax to be based on a calculated percentage that percentage should be rounded up to two decimal places and regulation 101(47) of the VAT Regulations 1995 SI 1995/2518 was not to apply.
RBS later decided that the agreement in relation to rounding up was contrary to articles 17 and 19 of the Sixth Directive and was therefore not effective.
The matter was referred by the Court of Session...
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