Key Facts
- •Kenthouse Properties Limited (KPL) appealed HMRC's disallowance of £183,601.05 input VAT on a property purchase.
- •The property was initially purchased by AG (director) personally, then transferred to KPL.
- •KPL was incorporated after planning permission was obtained to convert the property into flats.
- •KPL claimed input VAT after opting to tax, but HMRC disallowed it due to KPL making exempt supplies (short-term rentals) rather than zero-rated supplies (first grant of a major interest).
- •KPL argued the transfer should be a TOGC (transfer of a going concern), but this was not the subject of the appeal.
Legal Principles
Input VAT credit is allowed for input tax attributable to taxable supplies (s.26 VATA 1994).
Value Added Tax Act 1994
Zero-rating applies to the first grant of a major interest in a building converted into dwellings (Sch 8, Group 5, Item 1(b) VATA 1994).
Value Added Tax Act 1994, Schedule 8
An appeal lies to the Tribunal regarding the 'amount of any input tax which may be credited' (s.83(1)(c) VATA 1994).
Value Added Tax Act 1994
Issue estoppel or res judicata may arise from a default judgment, but it cannot prevent application of statute (Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] AC 993).
Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] AC 993
Outcomes
Appeal dismissed.
KPL failed to demonstrate a clear intention to make zero-rated supplies at the time of the transaction or later; only exempt supplies were made. The argument that the transfer should have been treated as a TOGC was outside the scope of the appeal. Estoppel arguments were not sufficiently made out.