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Was input tax overclaimed on costs relating to the supply of management charges and had the charges been made at open market value?

By Andrew Needham, June 2021

The appeals which are the subject of this appeal relate to the VAT input tax and output tax consequences for the JAMG group (‘the appellant’) of certain strategic and operational management services which were provided by members of the JAMG group to members of the JIMG group over a number of years.  

In 2007, the appellant concluded an agreement with a member of the JIMG VAT Group to provide management services. This was agreed as a cost plus 10% basis but was later changed to be a fixed yearly charge. During a VAT inspection HMRC concluded that the appellant had overclaimed input tax, in particular, on costs of an IPO. HMRC further concluded that the charges made to the JIMG VAT Group had not been made at open market value and issued a Notice of Direction directing open market value on the basis that they were connected parties and the JIMG VAT Group could recover all of its input tax. <>

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