Melford Capital – General partner of a property fund was entitled to fully recover VAT incurred on set-up and operating costs

In Melford Capital General Partner Ltd v HMRC [2020] UKFTT 0006 (TC), the First-tier Tribunal (FTT) held that VAT costs incurred on the set-up and operation of a fund were deductible in full by its general partner because, as representative member of a VAT group, the general partner was treated as undertaking the economic activities of another member of the VAT group.  Read more

This case concerned recovery of input VAT by the Appellant’s VAT group registration. The First Tier Tribunal (FTT) considered that the existence of the VAT group meant that the two members of the VAT group constituted a single taxable person for VAT purposes. Its activities included both ‘passive’ holding of shares, generally a non-economic activity, and the provision of management services to subsidiaries, an economic activity. But the FTT held that, as both were deemed to be undertaken by the single taxable person, that was equivalent to the traditional economic activity of an active holding company and, as all its supplies to the subsidiaries were taxable, the VAT group was entitled to recover all of its input VAT