KRS Finance Ltd: VAT Partial Exemption Special Method Rejected by FTT

• KRS Finance Ltd offers equity release mortgages and estate planning services
• The equity release mortgages generate VAT exempt turnover
• KRS is partly exempt and can recover around 10% of its residual input tax
• KRS applied for a partial exemption special method based on transaction count
• The First-tier Tribunal rejected KRS’s appeal against HMRC’s refusal of the proposed special method
• The Tribunal concluded that there was not enough evidence to establish that ER and EP transactions consumed the same level of inputs
• The transaction count method was not considered more fair and reasonable than the standard method
• KRS’s expenditure on marketing services was ruled to have a direct link to ER loans, not EP services
• KRS was not entitled to 10% recovery on marketing costs related only to ER loans.

Source: taxscape.deloitte.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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