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In Jane Borton t/a Contract Build v HMRC [2016] UKFTT TC05224 the First Tier Tribunal (FTT) agreed that the input VAT paid on the purchase of a car by a sole trader could be reclaimed.

The relevant legislation is the VAT (Input Tax) Order (SI 1992/3222) article 7, which says (amongst other things) that:

The FTT therefore had to consider whether the taxpayer intended to make it available for private use. 

The main difficulty for the FTT was whether a car acquired by a sole trader could ever be intended only for business use given that they remain the owner and controller of the car and the keys and could change any insurance policy at any time.  This had previously been discussed hypothetically by the Court of Appeal in Upton, although it was not necessary to reach a conclusion on the issue.

The FTT found that

The taxpayer’s appeal was therefore allowed.

 

Case reference: Jane Borton t/a Contract Build v HMRC [2016] UKFTT TC05224

Case referred to: The Commissioners for Customs & Excise v Upton [2002] EWCA Civ 520