In Terence Patrick Brady v HMRC [2017] TC5622 a director was allowed a claim for overpaid VAT after a liquidator demanded repayment of a company's rent paid to a director.
- Mr Brady rented a VAT opted property to his company.
- The company went into liquidation and the liquidator took legal action and claimed back sums paid to Mr Brady on the basis that there had been a preferential payment of debts to a connected party.
- Mr Brady settled with the liquidator and issued a credit note for rent.
- HMRC denied any adjustment for VAT purposes, saying that the repayment to the liquidator was settling legal proceedings and was outside the scope of VAT.
The tribunal disagreed with HMRC and decided that the repayment reduced the taxable supply and the director was allowed to claim a refund accordingly.
Comment
Although we don't know the whole story in this case, the dilemma during liquidation is that this is the time when specialist advice is most often requiredd and yet no one has any cash to purchase such advice.
