Can I salvage VAT on vehicles & apparel?

July 15, 2022

The First-tier Tribunal recently encountered a matter to do with a company's VAT plea related to the purchase of a customized number hoarding, two cars and apparel. Its judgement outlines the terms that must be successful for such demands to be valid.  What did the judgement outline?

Mr B and Mrs M Firth were business partners whose association was known as Church Farm. 

It recovered the VAT which it had paid on a customised number hoarding for the two cars they purchased, as well as for the apparel it bought for the purpose of Mrs M Firth using it in her 'upcoming venture'. 

HMRC denied the first set of demands. It also subtracted 50% of the claimed amount in order to account for a private utility. 

After an unsuccessful review by HMRC, Church Farm laid forward its plea in front of the First-tier Tribunal.

The Vehicles

Prior to the case, Church Farm's accountant had informed Mrs M Firth, that their demand for a claim upon the amount VAT would not be legible. However, vehicles which were bought primarily to be used for business purposes exclusively could have been legible. However, this was not the case with Church Farm.

As a result, the First-Tier Tribunal explained that the accurate method for recovering VAT is based upon the purpose of buying the product. 

Hypothetical Purpose of Use

HMRC, with the help of its common argument, stated that insurance policies which covered SDP usage had already implied a purpose for personal, and not corporate utility. 

However, Church Farm argued, stating that a statement of SDP had been introduced in their policies, automatically, without their knowledge. 

Furthermore, CF later argued by stating that it later had its policies with respect to the vehicles, edited so as to remove SDP statements.

Judgement by First Tier Tribunal

The First-Tier Tribunal favoured the plea by HMRC. However, this was not purely a result of SDP statements, but more importantly, the reason being that Church Farm's cars were within personal use scopes and not for business purposes, as they were luxury cars.

Did you know?

The judgement comes with a draft of the detailed conditions which HMRC adheres to view while supporting a restoration pertaining to vehicles and VAT.

Claims upon the Apparel and Customized Number Hoarding

Did you know?

VAT levied on the charge of a customised number plate could be recuperated only when that customized number is distinct and relevant to the identity of the firm's brand. 

The First-Tier Tribunal judged that “BS70BEN”, even though it referred to the name of Mr.B, did not adhere to the aforementioned criterion and thereby a VAT reclaim would not be applicable. 

On the other hand, the apparel was sports gear which Mrs M Firth would wear to run her exercise courses.

HMRC admitted the fact that there was an intention of corporate usage, however, it lacked details to be legible for  100% VAT restoration, thereby allowing only 50%.