Issue 10: Abort, Abort
I love this energy that I have. It’s 3:48am and I am buzzing with excitement about writing this next VAT article.
If you incur VAT in relation to a supply that you wish to make but it never takes place (aka Abrotive Supply), then your input VAT is fully recoverable if your intending supply would have been a taxable supply. Quite a mouthful I know but check out this example.
Imagine you set up your company with the intention of selling widgets (fully taxable). You did all the profitability studies and incurred a considerable amount of expense and VAT. You then decided it’s not worth it and you abort your plans to buy and sell widgets. Now normally you cannot recover your input tax if you are not carrying on a taxable business but because that was initially your intention then recovery is allowed
The good guys at HMRC have confirmed that you can recover your input tax if it directly relates to your intended/abortive taxable supply so please give them a virtual hug.
Case law: INZO v Belgian State; Beaverbank Properties
HMRC information Sheet 8/01
HMRC Business Brief 14/04