This was an appeal by the tax payer against a decision of the First-tier Tribunal (FTT) that input tax on postage costs was not recoverable, as it had been treated as an exempt supply at that time by Royal Mail.
The question before the FTT was wheather a taxable person, who had received supplies of services which were at the material time treated by Royal Mail as exempt under VAT Act 1994, but which were properly chargeable to VAT under the Sixth VAT Directive, was entitled to an input tax credit in respect of those supplies.
Both Royal Mail and HMRC believed that the supplies made by Royal Mail to the appellant were exempt from VAT and Royal Mail did not therefore issue VAT invoices to the appellant. The contract between the appellant and Royal Mail was silent as to VAT and the invoices indicated that the supplies were exempt from VAT.
HMRC stated:
“Why should HMRC
