Input tax claim on goods given away to connected companies

The taxpayer made repayment VAT return for the period ending August 2017. HMRC disallowed the input tax claimed on the importation of doors from China – it also raised an assessment for the periods May 2015 to May 2017 plus November 2017 for the same reason.

The taxpayer gave away all of the doors to connected companies that had ‘Just Doors’ in their title – some of these companies were VAT registered but most of them were not. The ‘Just Doors’ companies sold them on to the final customers. HMRC said the taxpayer had no business activity of buying and selling doors and therefore it could not claim input tax. The main reason for the taxpayer’s VAT registration was because it rented out commercial properties with an option to tax election in place on some of them.

The taxpayer’s representative argued that input tax could be claimed on the doors...