The taxpayer company supplied taxable self-storage services and offered exempt supplies of insurance for customers’ goods.
The firm decided that the standard method of apportionment – which must be used by partly exempt businesses unless a different method has been agreed with HMRC – did not produce a fair result.
It proposed an alternative special method that attributed residual input tax: input tax relevant to both taxable and exempt sales according to floor area.
On this basis the taxpayer calculated it was entitled to deduct 99.98% of the VAT incurred on construction maintenance and operation of the stores and that only 0.02% of its income was attributable to insurance sold through the reception areas.
The Revenue rejected the proposed special method saying the standard method based on income was the most accurate way of apportioning input tax.
The First-tier Tribunal found...
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