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HMRC internal manual

VAT Registration

HM Revenue & Customs
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Voluntary registration: claw back of input tax: an exempt supply was made but the intention to make a taxable supply remains

It is fairly common in the property development sector for input tax to be claimed in respect of an intended taxable supply, but for the initial supply to be exempt. Following the decisions in the cases of Briararch Ltd and Curtis Henderson Ltd [1992] STC 732, we have accepted that, where such a trader still intends to make a taxable supply (for example, a short term exempt letting of a property followed by a taxable disposal), we will make an apportionment of the input tax which has been deducted and only claw back an appropriate amount. If the intention to make a taxable supply ceases, then the whole of the provisionally deducted input tax will be repayable as per VATREG22400.