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Koolmove v HMRC

In Koolmove v HMRC [2019] UKFTT 502 (2 August 2019) the FTT found that input tax incurred prior to a company’s incorporation was deductible.

Mr McKee was a skilled software programmer. He had worked for a company called Jumar until 2014 and had started developing software in his spare time. Jumar came to believe (wrongly as it transpired) that Mr McKee was seeking to develop a product that infringed its copyright and confidential information. The company therefore issued proceedings.

The High Court dismissed the action and Mr McKee incorporated Koolmove shortly thereafter to further develop and commercialise the software. Mr McKee had incurred substantial costs in the litigation which he expected to be reimbursed by Koolmove. However following the VAT registration of Koolmove HMRC denied the deductibility of the input tax incurred by Mr McKee on the legal fees. This was on the basis that Koolmove...

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