Fantastic VAT

The taxpayer museum paid VAT on costs incurred in refurbishing and maintaining exhibits.

It argued that the VAT should be treated as residual input tax for the partial exemption calculation because the expenditure had a direct and immediate link to exempt supplies of admissions to the museum and taxable supplies made in the shop.

HMRC disagreed saying the VAT paid on the exhibition costs linked solely to exempt admission sales.

The First-tier Tribunal noted it was common ground that exhibit costs linked to admissions whereas the items in the shop could be sold anywhere regardless of whether the exhibits existed

The tribunal agreed with the Revenue that there was no link between the costs of maintaining the exhibits and the shop – but it agreed with the taxpayer that input tax on the cost of designing The Hut Book sold in the museum shop was...