Ince Gordon Dadds LLP v The Commissioners for HMRC
Decision date: 16 January 2023
Neutral citation: [2023] UKFTT 44 (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 case concerns whether Work Group plc (WG) could recover about £73,238 of input VAT incurred on services relating to a reverse takeover of Culver and a £20m fundraising (Project Kappa). The First-tier Tribunal held WG intended to join Culver's VAT group and that fundraising was a purpose of the takeover, but found the funds were used to acquire businesses that were intended to be customers of Culver, so the VAT on the fundraising costs was not recoverable. The appeal against HMRC's disallowance was dismissed and a late appeal was admitted.
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 held that where an acquiring company intends to join the VAT group of the acquired company, the acquired company's taxable supplies and activity can in principle be relied on as the acquiring company's downstream taxable activity; however, fundraising costs are only deductible as overheads to the extent the funds are used to develop the taxable economic activity of the entity that raised them (or, if applicable, the downstream activity of an acquirer joining the group's VAT membership). Funds raised and used to purchase businesses which are customers of the group's management services do not qualify as funding taxable activity for the purposes of input VAT recovery under the tribunal's findings.
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 tribunal indicated it would have considered pro-rating to exclude cost elements attributable to WG's own due diligence if it had found for the appellant, and expressed scepticism about treating post‑event, backdated management agreements or invoices as reliable evidence of actual taxable supplies.