This was an appeal against HMRC’s decision to cancel the Appellants VAT registration and disallow all input tax claimed on the grounds that the Appellant was not and had not intended to be in business. The Appellant registered for VAT on the basis that it intended to make taxable supplies.
The Appellant had two directors and a separate corporate investor (Icealarm) owning 60% of the shareholding. Icealarm had invested for commercial gain and would not have invested in an entity that had no intention of trading profitably. It was the Appellants intention to run a music studio and they purchased premises with the intention of converting them into a commercial music studio.
The construction of the studio took much longer than expected and the two potential clients identified by the Appellant dropped out of the project. Although efforts were made to secure other clients none were identified as the recording industry was
