Taxable person

The taxpayer began his business of selling security locks online in 2013 but did not become VAT-registered until 4 January 2014. He claimed input tax on his first VAT return for goods bought and sold between March 2013 and December 2013 on the basis that he was a “taxable person” within EU law because he was carrying on an economic activity.

HMRC allowed part of the claim on the basis that some goods had been bought but not sold before 4 January and could be treated as stock in hand at the time of registration. They did not allow the input VAT on the goods that had been bought and sold. They said article 289 of the EU Principle Directive applied to UK traders below the registration threshold: such traders were exempt from VAT and were not entitled to deduct input tax under article 168 because they were not...