Beneficial owner

Tax charge on post-cessation receipts

In September 2007 the taxpayer received a VAT repayment of £125m with statutory interest of £175m. This related to a series of overpayments made by the taxpayer and associated businesses in the same VAT group. All the other firms had ceased by the time of the repayment.

The taxpayer had been dormant since October 2005 and its trade transferred to another company.

HMRC assessed the taxpayer to corporation tax on the VAT repayment on the basis it was a post-cessation receipt within TA 1988 s 103(1). The firm was also assessed on the interest under s 18(3A) on the basis it represented a profit within case III of schedule D.

The company appealed claiming the payments were outside the scope of corporation tax because they related to businesses that had ceased trading.

The First-tier Tribunal the Upper Tribunal and the...