VAT CASES - 30.08.2016

Norseman Gold Plc v HMRC [2016] UKUT 69 (TCC). No economic activity

The case. This was an appeal by the taxpayer against a decision of the First-tier Tribunal (FTT). Norseman Gold (N) was a holding company and HMRC disallowed claims for input tax recovery on the grounds that it was not carrying on an economic activity during the relevant period because it was not making, nor did it have an intention to make in the future, supplies for consideration for VAT purposes. The FTT agreed with HMRC.

The facts. The FTT accepted that what N supplied to its subsidiaries was, in principle, capable of amounting to a taxable supply. But what it supplied in the relevant period was not supplied for consideration and was not therefore a taxable supply. The FTT held that any understanding between N and its subsidiaries about payment for services provided was insufficient to establish that supplies would be made for consideration. N’s position was that it was carrying on an economic activity. Its intention in relation to charging when it made the supplies was such as to qualify them as taxable.

N, a UK company, was the ultimate holding company of a corporate group. Its operating subsidiaries (all companies registered in Australia) carried out gold mining activities in Australia. N bore the cost of the directors’ remuneration and other costs but as the operating companies were not profitable during this period they had not made any recharges of management costs.

The decision. The FTT considered that N had not established that the “rather vague intention to levy an unspecified charge at some time in the future” was enough to establish the existence of consideration for the purposes of VAT and dismissed the appeal at the Upper Tribunal.