Hedge Fund Investment Management Limited v The Commissioners for HMRC
Decision date: 13 September 2022
Neutral citation: [2022] UKFTT 340 (TC)
Overall AI summary confidence: high
Short overview
This short overview is intended to summarise the case, issues and outcome so far as they are supported by the judgment.
AI confidence in this short overview: high
This VAT appeal concerned whether Hedge Fund Investment Management Limited (HFIM) was carrying on an economic activity, or was an “intending trader”, during several VAT periods so as to recover input VAT, and whether claimed input VAT (notably legal fees) had a direct and immediate link to taxable supplies; HMRC also imposed a penalty for careless inaccurate returns. The Tribunal found HFIM was an intending trader throughout the relevant periods, allowed recovery of input VAT on certain Reed Smith legal invoices that could be directly linked to an identifiable taxable invoice, allowed HFIM’s appeal against the penalty, and remitted detailed attribution of other claimed inputs to the parties to agree (or to return to the Tribunal).
Ratio decidendi
This summary is intended to identify the ratio decidendi, meaning the legal reasons for deciding and the binding part of the decision.
AI confidence in this ratio decidendi summary: medium
The Tribunal proceeded on the basis that an intention to make taxable supplies in the future, established at the time input tax is incurred, can suffice to treat a person as carrying on an economic activity for the purpose of input tax recovery; and that input VAT on costs (including legal costs) is recoverable where there is a direct and immediate link between those costs and an identifiable taxable transaction or anticipated taxable receipt.
Obiter dicta
This summary is intended to identify obiter dicta, meaning observations made by the way that were not necessary to deciding the case and are not binding.
AI confidence in this obiter dicta summary: medium
The judgment suggests (not as a binding ratio) that limited evidential breakdowns of inputs may make it appropriate to remit detailed attribution to the parties to agree rather than for the Tribunal to resolve on scant evidence, and that evidence such as FCA authorisation, business plans, marketing activity and historical introductions can support a finding of an intention to trade even if supplies are intermittent or delayed.