Sale of a machine

The company was sued by a customer in relation to a diamond-cutting contract. Under the settlement the taxpayer paid compensation and transferred a particular machine to the customer that was relevant for the process.

The taxpayer did not account for output tax on the value of the machine on the basis that it was outside the scope of VAT because it formed part of the compensation payment.

The taxpayer appealed.

The First-tier Tribunal said there had been a transfer in ownership of the machine from the company to the customer that amounted to a supply of goods.

The consideration was the customer’s agreement not to pursue its claim for damages. The judge said the nature of the consideration made no difference. The taxpayer was required to account for output tax on the sale of the machine.

The taxpayer's appeal was dismissed.

Issue: 45230 / Categories: Tax cases , VAT