The Supreme Court ruled that the VAT refund granted by the Court of Appeal was too high because they incorrectly considered the rental property and the solar panels as separate capital goods for determining the deductible part of VAT. X has two houses on a plot, one for personal use and one for rental. The rental property is rented without VAT. X argued that the VAT for the rental property’s roof is deductible, but the inspector disagreed, only allowing a deduction for the solar panels’ VAT. The Court of Appeal ruled that the rental property was not solely for personal use, so X is entitled to deduct input tax on the roof using a pro-rata approach. The Supreme Court disagreed, stating that for VAT purposes, the rental property and solar panels are a single capital good. Therefore, X is entitled to deduct input VAT in proportion to the total payments for transactions in respect of which VAT is deductible.
Source Taxlive
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