Vague intention

Input tax on property bought as a retail shop but used as a nursery

In February 2012 the taxpayer a father and son partnership bought a property with the intention of trading as a butcher’s shop a taxable activity. A month later the partners notified their intention to change the activity to a day nursery for children an exempt business.

The partnership submitted VAT repayment returns claiming input tax without declaring output tax. HMRC disallowed all input tax claims on the basis there was no link to taxable supplies. The taxpayer appealed.

The First-tier Tribunal concluded that ‘on the balance of probabilities’ it was likely that taxpayer had intended to trade as a nursery as soon as the property was purchased so there was never an entitlement to claim input tax. The tribunal said the taxpayer had not ‘seriously pursued’ the meat business...