Legally withdrawn

The taxpayer is a private limited company by guarantee with several wholly-owned subsidiaries. All are registered for VAT as a group.

For VAT purposes the charity engaged in business and non-business activities. The charity and Customs agreed an approved apportionment method of input tax in respect of taxable and non-taxable supplies.

However in light of the decision in Church of England Children’s Society v CRC [2005] STC 164 this was later withdrawn by HMRC on the basis that it no longer produced a fair and reasonable result.

The VAT tribunal rejected the charity’s appeal so it applied for judicial review of HMRC’s decision.

The High Court had to determine whether or not HMRC were bound in law to accept the taxpayer’s claim for additional recovery of input tax using the approved method formula.

The judge said that a public authority was entitled to change its...