The First-tier Tribunal have published the full detail behind their previous summary decision in the case of Ince Gordon Dadds LLP v HMRC [2023] UKFTT 44 (TC), in which the company appeal was dismissed.
Work Group plc (WG) acquired the Culver Holdings Ltd group (Culver – formerly Gordon Dadds Group Limited). WG joined the Culver VAT group on the same day that the takeover took effect. WG received and paid for services in relation to the takeover, and sought, via the VAT group representative member, Culver, to recover the input tax.
HMRC denied the claim on the basis that WG itself did not make or intend to make supplies within the scope of VAT.
The decision was appealed on the grounds that:
- the supplies should be treated as made to the VAT group representative Culver, which was carrying on the taxable economic activities of the group as a whole;
- the cost of the supplies to WG formed part of the overheads of the VAT group representative and were recoverable as such;
- VAT grouping can affect VAT recovery; and
- even looking at the position prior to the takeover, the input VAT was recoverable.
The FTT summarised their position as follows:
“We found in our summary decision that section 43 did not assist the appellant. As to the other arguments, we accepted that WG had an intention to join the VAT group (bringing this case within BAA Ltd v HMRC [2013] EWCA Civ 112, [2013] BVC 48; see paragraph 108). We accepted too that fundraising was WG’s intention and not merely Culver’s intention. But we had no evidence that any of the funds to be raised were intended to be used as working capital (to fund “downstream” operations) as opposed to being intended to be used for acquisitions; the evidence left the intention open for each. Nor did the evidence to which we were taken show that the funds raised were actually used for anything other than acquisitions. So we considered the intended use of those acquisitions. We found that their intended use was so that the acquisitions could be additional customers of Culver’s services. We distinguished, because of that, the acquisitions in the present case from those in Frank A Smart & Son Ltd v Commissioners for Her Majesty’s Revenue and Customs [2019] UKSC 39, [2019] 1 WLR 4849). So we dismissed the appeal.”
The full reasoning is discussed in the case report.
https://www.bailii.org/uk/cases/UKFTT/TC/2023/TC08699.html
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