The Court of Appeal ruled on closure notices that had disallowed deductions in corporation tax. The deductions related to administrative matters in relation to derivatives contracts. The Court of Appeal agreed with the lower courts that these type of costs were not the same as losses affecting the value of the contracts and that therefore it was not correct to regard the costs as diminishing the overall value of the derivatives contracts and therefore no deductions were appropriate in relation to corporation tax.
The Royal Opera House is a partially exempt trader who tried to make its overall input tax recovery including the costs of putting on productions attributable to the taxable supplies it makes. These are essentially catering and hospitality supplies made before and during productions. The Upper Tier Tribunal refused the link as they regarded the supply of the exempt production as the primary purpose of the opera House. Therefore, the production costs remained non-recoverable under partial exemption regulations.
For anybody operating a partial exemption method, expenditure must be correctly identified for the purposes of recovery of tax.
In the case of Malde v HMRC the First-tier Tribunal dismissed the Appellant’s appeal against HMRCs refusal to allow input tax to be reclaimed in relation to legal fees incurred by a sole trader where the input tax the individual had incurred in dealing with a freezing order related to the issue of personal liability notices. The input tax was for legal fees and HMRC said that the VAT that had been reclaimed had nothing to do with the supplies the sole trader usually made in the course of his business. This is a lesson for all those that trade in their own name that the input tax you recover on your VAT returns must relate to the supplies that you make and upon which you declare output tax.
This case was an HMRC application for permission to appeal to the Upper Tribunal in a case where they had initially lost in the First-tier Tribunal on the matter of whether Discovery Assessments issued under TMA 1970 S.29 when they had argued that the concept of “staleness” could not render an assessment invalid. Having lost in the initial hearing HMRC were refused permission to appeal.
In the case of R (on the application of Cartref Care Home)  an application was made for a Judicial Review to quash Partnership Follower Notices and Loan Charge Notices on the basis they were not compatible with the Human Rights Act 1998. The application was dismissed, but as HMRC seek to deal with the loan charge issue, it is likely that this type of court case will occur quite regularly.