Who received the services?

Input tax on legal fees incurred by director

Praesto had paid legal fees in relation to civil proceedings brought against its director by his former employer CSP which was a competitor. Praesto claimed input tax on the fees charged by the solicitor defending the director. HMRC refused on the ground the solicitors’ supply of services was to the director not the company.

The First-tier Tribunal allowed the taxpayer’s appeal. HMRC appealed.

The Upper Tribunal referred to Lord Neuberger’s review of the case law in CRC v Airtours Holidays Transport Ltd [2016] STC 1509 in relation to who received a supply of services. It said the ‘correct approach’ was to decide whether Praesto was legally entitled to services by the solicitors. The First-tier Tribunal had not made a finding on this issue. This was an error of law which was enough to set aside its decision. The Upper Tribunal said...