In JDI International Leasing v HMRC [2017] UKFTT 329 (20 April 2017) the FTT found that JDI could not recover input tax incurred in relation to tools leased free of charge to another group company.
JDI was incorporated in the Cayman Islands and was a member of the Baker Hughes Group. Following a group reorganisation it owned highly specialised oilfield drilling tools as well as intellectual property rights relating to them. It manufactured or procured the manufacturing of the tools which it leased without charging a rental to another group company established in the Netherlands (which sub-let them to end users); and it sold spare parts for the maintenance of the tools. HMRC refused to repay input tax to JDI in relation to the purchase of UK tools on the ground that it did not use the tools for the purpose of an economic activity.
The...
