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SRI International v HMRC

In SRI International v HMRC (Upper Tribunal – 21 June) a Delaware company had been incorporated in 1999 and entered into a 15-year lease of premises in London but ceased trading in 2001. A Californian corporation (S) had guaranteed the rent under the lease.

In 2004 S paid the lessor £1 500 000 plus VAT in order to be released from its guarantee. S reclaimed the VAT under VAT Regulations SI 1995/2518 reg 186. HMRC rejected the claim on the basis that they were not satisfied that S was carrying on a business. S appealed.

The Upper Tribunal allowed the appeal (reversing the decision of the First-tier Tribunal). Sir Stephen Oliver held that ‘the only requirement under regulation 186 is that the VAT would be “input tax” if the trader was a taxable person in the UK. If that requirement...

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