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 director’s case was not helped by the fact that the lawyers’ engagement letter was with him personally and invoices were also addressed to him personally at his home address.
The First-tier Tribunal allowed the taxpayer’s appeal but the Upper Tribunal overturned that decision.
In the Court of Appeal Lord Justice Hamblen delivered the judgment. He noted that VATA 1994 s 24(1) requires an expense to be for the ‘purpose’ of the business to claim input tax with a supply of goods or services being made ‘to him’ – that is the business...
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