Special method accepted

The taxpayer company provided self-storage services in purpose-built premises to businesses and private customers. The standard-rated supplies accounted for most of the company’s turnover.

Customers stored goods had to be insured. Cover could be bought from the taxpayer if necessary under a block policy that was exempt from VAT.

The company decided the standard method of apportioning input tax based on turnover did not attribute a sufficient proportion of the tax incurred on overheads to taxable supplies.

The firm applied to use a special method of attributing input tax based on floor space under which 99.98% of the tax relating to its buildings would be attributed to taxable supplies rather than 94% under the standard approach.

HMRC rejected the proposals for partial exemption special methods and assessed the taxpayer to VAT using the standard method of apportionment.

The company appealed.

The First-tier Tribunal agreed the special method...