Chancellor, Masters & Scholars of the University of Cambridge v HMRC

In Chancellor Masters & Scholars of the University of Cambridge v HMRC (No. 2) (TC02836 – 29 August) a university which was partly exempt and had agreed a special method for attributing its input tax reclaimed input tax on professional fees relating to the management of an endowment fund which invested donations which the university received and which was used to finance both taxable and exempt activities. HMRC rejected the claim on the basis that the university’s investment activities were not an economic activity (and if it had been an economic activity the fees would have related to exempt supplies). The First-tier Tribunal allowed the university’s appeal holding that the input tax should be treated as residual and as partly recoverable under the university’s special method. Judge Connell held that ‘the VAT system achieves the greatest degree of simplicity and...