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HMRC internal manual

VAT Input Tax

HM Revenue & Customs
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Legal history: cases about intending traders

Ghent Coal 1998 STC 260
Rompleman ECR 655

Please note that the following material is not a full summary of the case - it merely highlights the principle referred to in the appropriate section of this manual.

Ghent Coal 1998 STC 260

A company acquired land and started preparatory work so it was able to carry on its business. The local council forced the company to sell the land and with the sale went any prospect of the company fulfilling their business intention. The tax authorities sought to recover the input tax and the matter was referred to the CJEU.

The Court confirmed that the right to recover remains in circumstances where events beyond the control of the company cause the business to fail to fulfil its original intention.

Rompleman ECR 655

A couple acquired a future title to two showroom units that were being built. The showrooms were to be let to traders and so the couple opted to tax. The couple applied for refund of the input tax incurred before the units were let but this claim was initially refused on the grounds that no taxable supplies had yet been made.

The Court ruled that someone undertaking acts preparatory to the carrying on of an economic activity qualified as a taxable person. Input tax was recoverable because the purpose of the VAT deduction system was to relieve entirely the burden of VAT suffered in the course of a taxable person’s economic activities. Those activities included preparatory acts such as buying immoveable property.