Author of own misfortune

The taxpayer company was incorporated in September 2006 and registered for VAT from 1 August 2007. It claimed input VAT in respect of expenditure previously incurred in respect of a retail site development.

HMRC only allowed recovery of tax for the six-month period before registration. The company applied to recover the disallowed claim under a concession in VAT notice 724A but HMRC said this did not apply to the company.

The company therefore applied for judicial review saying that HMRC’s refusal of the claim was irrational and that the concession led to an expectation that the input tax was recoverable.

Examining the relevant paragraph (9.4) of the notice the court found that the concession only applied if the taxpayer had registered ‘as a result of opting to tax’. In this instance that condition was not satisfied.

HMRC had provided clear information when the company registered and...