VAT no input tax recovery for fees to defend owner and sole director in criminal proceedings

Owner-managed businesses should be made aware of a recent First-tier Tribunal (Tax Chamber) VAT decision. The tribunal held that a company could not recover input tax on legal fees to defend its owner and sole director against criminal charges of false accounting.

The decision highlights the importance of pinpointing the true purposes of expenditure to determine its VAT treatment, particularly for owner-managed businesses, as the purposes of the business and its owner may appear closely entwined.