Two of our clients (the first a charity and the second a sole-trader) have recently challenged our calculation of their VAT recovery.
In each case their purchases were not used solely for business purposes and therefore, as we understood from previous discussions with you in relation to other clients, we have not treated all the related input tax as recoverable since it is not “input tax”. The charity purchased a computer for £60,000 in May 2016 which they use for their fully taxable retail shop business as well as for nonbusiness purposes. In the other case, the client (a fully taxable trader) paid £100,000 plus VAT for construction work in November 2016 on an extension to the property where she resides and has her office. The extension is used partly as an office and partly for residential purposes and is almost the same size again as the original property.
Our clients claim to have received advice that they can recover all of this VAT back under European case-law principles and they are asking us to amend the returns accordingly. With that in mind, I would greatly appreciate a note from you explaining whether my clients are correct and what the position is. Can we amend the returns and are there any calculations or evidence we need to provide?”