29 September, 2015
The First Tier Tribunal has held that a company is not entitled to recover Input Tax on the costs of removing a minority shareholder as the services supplied by their Advisor was for the majority shareholders rather than the company itself.
The facts of the case revolved around the removal of a troublesome minority shareholder by the majority shareholders. Invoices from their Advisor were addressed directly to the majority shareholders which indicated that the contract for work was held with them rather than with the company. Although the interests of the majority shareholders and the company were intertwined, the proceedings were resolved in the names of the majority shareholders. By removing the minority shareholder, the majority shareholders claimed that they were able to concentrate on the company business but the Tribunal held that there was no direct or immediate link between the services received and the company business.
This case illustrates the need for there to be a direct and immediate link with the company, who is ultimately the tax payer, and the importance of documenting services as being with the company rather than the individuals involved.