Invoice confusion

A B C and D were taxpayers who had been in partnership for many years.

The partnership deed provided that a partner had to retire at a certain age at which time he would receive an amount equal to his share of the partnership capital. He would not be entitled to payment for the partnership’s goodwill.

D was approaching retirement age. His solicitors wrote to the other partners to allege bad faith by A and B and require the dissolution of the partnership.

A and B consulted the same solicitors while C instructed a different firm.

The matter was eventually settled but a dispute arose with HMRC over the legal bills.

The partnership claimed repayment of the input tax on invoices from both firms of solicitors. The Revenue refused on the basis the partnership was not the client.

A B and C argued that...