The Taxpayer incurred significant amounts of VAT on a major refurbishment project. Once the works had been completed, it opted to tax and leased part of the premises to the students’ union for £5k per annum plus VAT. It claimed full recovery of an element of the input VAT incurred on the works carried out on the leased part of the premises. The First Tier Tribunal (FTT) has disallowed its claim on the basis primarily that the lease is for nominal consideration only and does not constitute a business activity for VAT purposes. The FTT also considered that there had been a single construction project in respect of a single building, so that the Appellant should recover residual VAT according to its usual recovery method.
