Stirling Investments v HMRC

VAT: Whether credit note effective for VAT purposes

In Stirling Investments v HMRC (TC00374 – 23 February) a married couple carried on an investment business in partnership and were also directors of a limited company carrying on a similar business. Both the partnership and the company were registered for VAT. In 2006 the company sold two properties at a substantial profit. The couple wished to transfer this profit to the partnership and arranged for the partnership to issue an invoice of £525 000 plus VAT in respect of 'management charges'. The partnership accounted for the VAT as output tax and the company reclaimed it as input tax. Subsequently HMRC discovered that the company had made exempt supplies in respect of these properties and issued a ruling that the company could not reclaim the input tax. Following this...