TAC determination: VAT recovery entitlement in relation to the acquisition of investment property

The TAC issued its determination on 23 February 2021 in relation to an appeal concerning VAT recovery entitlement regarding the acquisition of investment property (TAC determination released on 14 May 2021). ALG represented the Appellant in the appeal which concerns an old chestnut. 

The scenario involves property subject to so called ‘legacy leases’. These leases are at least ten years duration granted prior to 1 July 2008. VAT arose upfront when the lease was granted as distinct from arising on the rent.

While the case is complex and the determination is lengthy, essentially the matter boils down to whether there is a link between the expenditure and a vatable supply. The Appellant’s position is that the lease is a vatable activity that is carried out throughout the full term of the lease. Accordingly the Appellant, as the new landlord, is carrying on a vatable activity and entitled to recovery. The fact that VAT arose upfront is not relevant. 

The Appeal Commissioner agreed that there is a link to a vatable activity and found in favour of the Appellant. In our view the determination is as expected as it is consistent with the 1997 judgment of the Supreme Court in the ‘Erin Executor’ case. 

For more information on this topic please contact Brian Butler or any member of our Tax Disputes & Enquiries team.

Date published: 18 May 2021