Substantia Invest v HMRC

In Substantia Invest v HMRC [2015] UKFTT 671 (14 December 2015) the FTT found that input tax incurred by a property investment company on legal fees for the defense of its sole director was not deductible.

The appeal related to input tax incurred on legal services for the defence of Substantia’s owner and sole director against criminal charges of false accounting. HMRC had rejected the repayment claim on the grounds that Substantia was not carrying on a taxable business and that there was no direct and immediate link between the reclaimed input tax and supplies made by it.

Referring (inter alia) to Becker [2013] EUECJ (C-104/12) the FTT observed that for input tax to be recoverable the goods or services must not simply benefit the business but must be used for the purpose of the business; a ‘direct and immediate link’ was required.

The FTT...