Denbrae Ltd v Revenue & Customs [2010] UKFTT 195 (TC) (28 April 2010)

Denbrae Ltd v Revenue & Customs [2010] UKFTT 195 (TC) (28 April 2010)

The Tribunal found that the legal fees were incurred to protect and recover assets, not for the purpose of Denbrae’s economic activities. There was no direct and immediate link between the input tax on legal fees and any taxable supplies. The litigation was not for the purpose of the company’s economic activity, and thus the input tax was not deductible.

Citation
[2010] UKFTT 195 (TC)
Parties
Appellant: Denbrae Limited; Respondents: The Commissioners for Her Majesty’s Revenue & Customs
Jurisdiction
United Kingdom
Judgment Date
28 April 2010
Procedural Posture
VAT Input Tax Appeal / First Tier Tribunal (tax), Final Decision
Outcome
Appeal dismissed
Legal Topics
Input Tax Deduction, Attribution of Input Tax, Legal Fees and Taxable Supplies, Direct and Immediate Link Requirement
Tax Law VAT Input Tax Deduction Attribution of Input Tax Legal Fees and Taxable Supplies Direct and Immediate Link Requirement

Case Brief

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Parties

Denbrae Limited

Appellant

The Commissioners for Her Majesty’s Revenue & Customs

Respondents

Procedural Posture

VAT Input Tax Appeal / First Tier Tribunal (tax), Final Decision

Legal Issues

  1. 1 Whether input tax incurred on legal fees relating to action against previous directors is attributable to taxable supplies made by the Appellant
  2. 2 Whether there was a direct and immediate link between the input tax and taxable supplies
  3. 3 Whether the principles in Investrand BV apply

Ratio Decidendi

The Tribunal found that the legal fees were incurred to protect and recover assets, not for the purpose of Denbrae’s economic activities. There was no direct and immediate link between the input tax on legal fees and any taxable supplies. The litigation was not for the purpose of the company’s economic activity, and thus the input tax was not deductible.

Court Disposition

Appeal dismissed

Orders

  • Notice of Amendment to Assessment dated 25 November 2005 confirmed
  • Refusal to repay voluntary disclosure dated 5 October 2006 confirmed