Summary

The appellant appealed against HMRC’s decision that supplies made by it to the Ministry of Defence (MoD) were standard rated. The issue for determination was whether the supply by the appellant to the MoD of the ‘Crowsnest project’ falls within the scope of item 2, Group 8, Schedule 8 to the Value Added Tax Act 1994 (VAT Act) which provides for the zero-rating of:

“The supply, repair or maintenance of a qualifying aircraft or the modification or conversion of any such aircraft provided that when so modified or converted it will remain a qualifying aircraft.”

Background

The objective of the Crowsnest project was to provide the Royal Navy with a successor air search radar capability fitted to Merlin Mk 2 helicopters. There was no disagreement between the parties that the aircraft was and remained a qualifying aircraft.

The appellant proposed a