Litigation Recent Decisions 29/08/95

VAT on supplying land and application of input tax

Commissioners of Customs & Excise v Dennis Rye (1995).

QBD (McCullough J) 25/7/95.

Summary: Whether input tax paid on land purchases by land dealing company was attributable to residual inputs.

Commissioners' appeal under s.11 Tribunal and Inquiries Act 1992 against VAT Tribunal's decision setting aside VAT assessments for £14,036 on the taxpayer on the taxpayer' s appeal under s.40 (1) Value Added Tax Act 1983. In 1990 the taxpayer bought land at Whitwell with a view to development for residential or leisure purposes. No planning permission for such development exists or was sought and the land was held as a trading asset. In 1991 the taxpayer bought the site of an old foundry in Mansfield. The existing buildings were then demolished and planning permission was obtained for residential development. It too is a trading asset. The VAT paid by the taxpayer was properly deductible but the issue concerning the assessments was whether it should have been taken into account on the acquisition of those goods and services which the taxpayer used and for the purposes of its non-taxable supplies known as residual inputs, eg office supplies and telephone services.