Vehicle Control Services Ltd v Revenue and Customs (VAT - INPUT TAX : Attribution) [2016] UKFTT 443 (TC) (02 March 2015)

Vehicle Control Services Ltd v Revenue and Customs (VAT - INPUT TAX : Attribution) [2016] UKFTT 443 (TC) (02 March 2015)

Input VAT incurred by VCS must be apportioned between taxable supplies and activities outside the scope of VAT. Only the proportion of input VAT attributable to taxable supplies is deductible. The majority of VCS’s income is from PCN charges, which are outside the scope of VAT, so only a small proportion of input VAT is recoverable. HMRC’s income-based apportionment is fair and reasonable in the absence of a more accurate method from VCS.

Citation
[2016] UKFTT 443
Parties
Appellant: Vehicle Control Services Ltd; Respondents: The Commissioners for Her Majesty’s Revenue & Customs
Jurisdiction
United Kingdom
Judgment Date
02 March 2015
Procedural Posture
VAT Appeal / First Tier Tribunal (tax) Final Decision
Outcome
Appeal refused
Legal Topics
Input Tax Attribution, Apportionment of Input VAT, Supplies Outside Scope of VAT, Business Vs Non Business Activity
Tax Law VAT Input Tax Attribution Apportionment of Input VAT Supplies Outside Scope of VAT Business Vs Non Business Activity

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Parties

Vehicle Control Services Ltd

Appellant

The Commissioners for Her Majesty’s Revenue & Customs

Respondents

Procedural Posture

VAT Appeal / First Tier Tribunal (tax) Final Decision

Legal Issues

  1. 1 Whether input VAT incurred by VCS must be apportioned between taxable supplies and activities outside the scope of VAT
  2. 2 Whether all input VAT is recoverable as business expenditure
  3. 3 Whether income from PCNs is business income or non-business income for VAT purposes

Ratio Decidendi

Input VAT incurred by VCS must be apportioned between taxable supplies and activities outside the scope of VAT. Only the proportion of input VAT attributable to taxable supplies is deductible. The majority of VCS’s income is from PCN charges, which are outside the scope of VAT, so only a small proportion of input VAT is recoverable. HMRC’s income-based apportionment is fair and reasonable in the absence of a more accurate method from VCS.

Court Disposition

Appeal refused

Orders

  • Input VAT must be apportioned between taxable supplies and activities outside the scope of VAT.
  • Only the proportion of input VAT attributable to taxable supplies is deductible.