In 2008 the appellants purchased an industrial unit/warehouse in Eastbourne which they opted to tax.  It was sold on 16 October 2015 for £1.5 million plus VAT of £300,000.  During the intervening seven-year period, the property was occupied by four companies.  None of these companies paid rent for their occupation of the property.  

The appellants’ final VAT return included the VAT of £300,000, reduced by input tax of £68,541. HMRC disallowed most of the input tax and issued two assessments of £54,935 and £9,511, a total of £64,446.  The balance was allowed as relating to the fees of solicitors and estate agents on the sale of the property.  

The appellants appealed the assessments on the basis that the costs were allowable because they had carried on the economic activity of letting the property, and/or of selling the property. 

There were two main issues:;