Whose benefit?

Input tax on tax advice given to a company

The taxpayer took advice on an employee benefit trust from a firm of tax consultants. The consultants charged an initial fee of £2 750 plus VAT followed by a secondary fee of £50 000 plus VAT once the taxpayer had implemented specific measures which included buying investment gold to put into the trust. The taxpayer claimed to deduct input tax of £10 000 on the second payment. HMRC refused the claim on the ground that it was not for the purpose of the company’s taxable supplies as a building business but was for the personal benefit of the sole company director who would benefit from the scheme.

The taxpayer appealed saying the advice would increase the profits of the company because of reduced tax and National Insurance payments.

The First-tier Tribunal decided first that it was clear from the contract...