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In PwC v HMRC [2015] UKFTT 7 (6 January 2015) the FTT held that an unlawful extension did not make an input tax block unlawful.

PwC claimed the recovery of input tax on entertainment expenses. The issue was the validity of the input tax block on recovery of input tax incurred on goods and services used for the purpose of business entertainment (art 17(6) of the Sixth VAT Directive). The VAT (Special Provisions) Order 1988 (which came into effect on 1 August 1988) had been found unlawful in Danfoss (C-37/07) as it had extended the block to the entertainment of overseas customers. It was eventually replaced by the 2011 Order (on 1 May 2011) and HMRC had refunded VAT incurred on the entertainment of overseas customers in the period from 1 August 1988 to 1 May 2011.

Relying in particular on the opinion of the advocate general (AG)...

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