3D Crowd CIC v Revenue And Customs (Value Added Tax - input tax recovery) [2023] UKFTT 495 (TC) (12 June 2023)

3D Crowd CIC v Revenue And Customs (Value Added Tax - input tax recovery) [2023] UKFTT 495 (TC) (12 June 2023)

VAT incurred by 3D Crowd CIC on direct costs of BSI/CE accreditation was incurred solely for business purposes and is fully recoverable as input tax. VAT incurred on general overheads and on the costs of producing PPE, which was donated, was incurred partly for business and partly for non-business/altruistic purposes and must be apportioned under section 24(5) VATA. The inability to make taxable supplies does not preclude input tax recovery where there was a genuine intention to trade, but the immediate use of the PPE as donations means the business purpose was not predominant for those costs.

Citation
[2023] UKFTT 495
Parties
Appellant: 3D Crowd CIC; Respondents: The Commissioners for His Majesty’s Revenue and Customs
Jurisdiction
United Kingdom
Judgment Date
12 June 2023
Procedural Posture
VAT Input Tax Recovery Appeal / First Tier Tribunal (tax) Substantive Judgment
Outcome
Appeal allowed in part
Legal Topics
Value Added Tax, Input Tax Recovery, Business Purpose Test, Apportionment of VAT, Intending Trader, Charitable/altruistic Activities, Economic Activity
Tax Law Value Added Tax Input Tax Recovery Business Purpose Test Apportionment of VAT Intending Trader Charitable/altruistic Activities Economic Activity

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Parties

3D Crowd CIC

Appellant

The Commissioners for His Majesty’s Revenue and Customs

Respondents

Procedural Posture

VAT Input Tax Recovery Appeal / First Tier Tribunal (tax) Substantive Judgment

Legal Issues

  1. 1 Whether VAT incurred by 3D Crowd CIC on supplies made to it is recoverable as input tax under section 24(1) Value Added Tax Act 1994
  2. 2 Whether the supplies were made for the purposes of its business or for non-business/altruistic purposes
  3. 3 Whether VAT incurred on costs relating to PPE given away can be apportioned between business and non-business purposes

Ratio Decidendi

VAT incurred by 3D Crowd CIC on direct costs of BSI/CE accreditation was incurred solely for business purposes and is fully recoverable as input tax. VAT incurred on general overheads and on the costs of producing PPE, which was donated, was incurred partly for business and partly for non-business/altruistic purposes and must be apportioned under section 24(5) VATA. The inability to make taxable supplies does not preclude input tax recovery where there was a genuine intention to trade, but the immediate use of the PPE as donations means the business purpose was not predominant for those costs.

Court Disposition

Appeal allowed in part

Orders

  • VAT incurred on direct BSI/CE accreditation costs is recoverable in full as input tax.
  • VAT incurred on general overheads and PPE production costs must be apportioned between business and non-business purposes; parties to agree apportionment.