Investments and input tax

The taxpayer university’s main activity was the provision of VAT-exempt supplies of education. It also made taxable supplies including commercial research sales of publications accommodation and the hiring of facilities and equipment.

It invested donations and endowments in a fund that invested in income-producing securities used to support all activities.

Professional fund managers were appointed. Their fees were charged as a percentage of the total value of the fund. Some were chargeable to VAT at the standard rate but residual input tax had to be apportioned where goods and services were used for both taxed and exempt transactions.

The university used a partial exemption special method that had been agreed with HMRC.

The taxpayer claimed...