The UK Tribunal has allowed the appeal by the general partner of Melford Special Situations LP (the Fund), concerning the recovery of input tax. The case was regarding the full deduction of VAT on Set-up Costs and the Operating Costs as input tax by the appellant. The appellant holds shares in Hyde Park Hayes Ltd (HPH). HPH, in turn, has shares in a number of companies or special purpose vehicles (SPV’s) and both hold the separate underlying assets.
The appellant argued that the activities of the appellant, including those of the Fund and LLP should be treated as activities of a group for VAT purposes. In addition to this, it was also stated that members of a VAT group are treated as a single taxable person as per the section 44 VATA 1994 and Article 11, Directive 2006/112 with cite to case C-7/13 Skandia America Corporation v Skatteverket.
In opposition, HMRC said that the recovery of input tax by the group should be restricted as the taxable services provided included non-economic activities. Since the UK Tribunal did not find that separate economic and non-economic activities are undertaken, the recovery of costs is allowed in full.