No benefit to the company

Input tax on advertisement on a motor racing vehicle

In the January 2011 VAT period Nick Jones Racing Ltd (NJR) invoiced the taxpayer for £25 000 plus VAT for advertising its name on the sill of a racing car support vehicle owned by NJR. The taxpayer claimed the input tax as an advertising cost. It also claimed the cost as a corporation tax deduction for the year ended 31 October 2010. The racing car company was owned by the son of the taxpayer’s accountant MJ director of J & R Business Services who (MJ) had been convicted of fraud.

HMRC disallowed the input tax claim on the basis that the expense was not for the ‘purpose’ of the company’s business (VATA 1994 s 24(1)).

The First-tier Tribunal learned that under the advertising arrangement the taxpayer issued two cheques to NJR: one for £20...