A property development company has warded off a challenge by Customs & Excise to a VAT Tribunal decision that a link between the purchase of a Brighton property and the subsequent building contract entitled the company to recover input tax.
Southern Primary Housing Association purchased the property in 2000 for £435,000 plus VAT, and, on the same day, sold it on to a housing trust for £481,000, charging no VAT on the sale.
The company then entered into a £1.87m build-and-design contract with the purchaser, with provision for the construction work to be zero-rated.
Customs & Excise held that Southern Primary was not entitled to recover any of its input tax. The VAT Tribunal, however, overruled the decision, holding that the link between the purchase and the development contract was immediate and direct, and that, in those circumstances, input tax could be recovered.
The High Court judge upheld the tribunal’s decision, stating that the crucial test in deciding the question of the recovery of input tax was whether an immediate and direct link could be made between an input and output transaction, and whether the cost of the land was to be regarded as a component in the cost of acquiring the building services.
He ruled that, on the facts, the tribunal had been entitled to reach the view it did.
Southern Primary Housing Association v Commissioners of Customs & Excise Chancery Division (Sir Donald Rattee) 13 February 2003.
Richard Barlow (instructed by Rowel Genn Solicitors) appeared for the claimant; Philippa Whipple (instructed by the solicitor for Customs & Excise) appeared for the defendant.
References: PLS News 17/02/03
