Serious business

Input tax claim on recording studio

The taxpayer registered for VAT in May 2009 with the intention of converting industrial premises into a recording studio and hiring it to commercial users for between £500 and £700 a day. In the event the taxpayer was unable to procure any clients and the business ceased.

HMRC cancelled the registration in June 2014 backdating it to May 2009 on the basis that there had never been an intention to make taxable supplies. It disallowed the taxpayer’s claim for input tax.

The main director T owned 35% of the company shares with the balance owned by an external investor (60%) and R (5%) who was also a director and company secretary. T said the external investor would not have become involved had there been no commercial intention. There had also been builder problems with the construction which...