The Towards Zero Foundation v The Commissioners for HMRC
Decision date: 24 May 2022
Neutral citation: [2022] UKFTT 226 (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
The Tribunal allowed The Towards Zero Foundation's appeal, holding that the charity's unpaid initial "free" crash tests formed part of a single business activity of providing NCAP testing to manufacturers and were not a separate non-business activity for VAT purposes. As a result, UK VAT on general overheads attributable to those tests was recoverable and HMRC's assessments (total £152,311) were set aside. The Tribunal treated the seed-funded tests as a necessary precursor/investment to later taxable supplies by manufacturers.
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: high
Costs of activities carried out without charge can nonetheless form part of the general overheads of an economic/business activity and be recoverable where they are an inherent, necessary precursor or investment to making taxable supplies; the characterisation of unpaid activity depends on whether it is an independent non-economic activity or an integral element of the taxable business, judged by objective circumstances.
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 observed that, had HMRC been justified in making an assessment, it could have made one to best judgment and that the Appellant had not provided evidence to calibrate any reduced assessment; it also noted that charitable objects or articles restricting trading do not automatically preclude recognition of a VAT business activity.