In a recent decision by the UK First-tier Tribunal, the question of input tax recovery was examined under section 24(1) of the Value Added Tax Act 1994. The case centered around whether the supplies made to the appellant were made for the purposes of its business and therefore constituted input tax. The tribunal found that in certain cases, the supplies were made for the purposes of the appellant’s business and therefore allowed the appeal in part.
The case involved a company that provided a platform for users to purchase and sell virtual currency. The company argued that the supplies made to it by various third-party suppliers were made for the purposes of its business and therefore constituted input tax. The supplies in question included software licenses, hosting services, and advertising.
The tribunal first examined the nature of the appellant’s business. It found that the company’s main activity was the provision of a platform for users to buy and sell virtual currency. The supplies in question were all used in the course of this activity. Therefore, the tribunal concluded that the supplies were made for the purposes of the appellant’s business.
The tribunal then turned to the question of whether the supplies were used exclusively for the purposes of the appellant’s business. The tribunal noted that the supplies were not used exclusively for the appellant’s business, as some of the software licenses were used for personal use by the company’s directors. However, the tribunal found that this did not necessarily preclude input tax recovery. The tribunal noted that the relevant test was whether the supplies were used predominantly for the purposes of the appellant’s business.
The tribunal then examined each of the supplies in turn. With respect to the software licenses, the tribunal found that they were used predominantly for the purposes of the appellant’s business. The licenses were used to provide the platform for users to buy and sell virtual currency, which was the company’s main activity. Therefore, the tribunal allowed input tax recovery with respect to the software licenses.
With respect to the hosting services, the tribunal found that they were also used predominantly for the purposes of the appellant’s business. The hosting services were used to host the company’s website, which was used to provide the platform for users to buy and sell virtual currency. Therefore, the tribunal allowed input tax recovery with respect to the hosting services.
With respect to the advertising, the tribunal found that it was not used predominantly for the purposes of the appellant’s business. The advertising was used to promote the company’s brand, rather than to provide the platform for users to buy and sell virtual currency. Therefore, the tribunal disallowed input tax recovery with respect to the advertising.
In conclusion, the tribunal found that in certain cases, the supplies made to the appellant were made for the purposes of its business and therefore constituted input tax. The tribunal allowed input tax recovery with respect to the software licenses and hosting services, but disallowed input tax recovery with respect to the advertising.
This case highlights the importance of carefully considering the nature of supplies made to a business and whether they are used exclusively or predominantly for the purposes of the business. Businesses should ensure that they keep accurate records of their input tax recovery, and seek professional advice if they are unsure about the VAT treatment of particular supplies.
