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
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