In Melford Capital General Partner Ltd v HMRC [2020] TC7514, the First Tier Tribunal (FTT) held that VAT incurred in respect of the set-up and operating costs of a property fund was fully deductible. The fund only received dividends and was not making taxable supplies in its own right.

The FTT concluded that there were no non-economic activities undertaken by the GP/LLP VAT group as any disposals would take place at either the SPV or Holdco level. This meant that the GP/LLP VAT group would never make an exempt supply but only taxable advisory services to the SPVs. Therefore, input tax was wholly attributable to the taxable supply of services and fully recoverable. The appeal was allowed.

Useful links

Partnerships & VAT
There are three types of partnership in England and Wales; each defined by a different partnership act.

Unlawful, illegal or ultra vires dividends
Is there a tax charge on an unlawful/illegal or ultra vires dividend?

External links

Melford Capital General Partner Ltd v HMRC [2020] TC7514