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Input tax on legal fees: business or private expense?

Neil Warren considers important cases – such as Praesto, Airtours and P&O European Ferries – about input tax and legal fees, also giving tips on the key issues to consider before making a claim.

VAT In most situations, it is usually clear whether input tax can be claimed on a business expense. However, a grey area relates to the issue of input tax on legal fees, and the dilemma as to whether the costs relate to the individual business owner or director in his personal capacity, usually linked to a litigation process, or the VAT-registered business. And in the case of expenses linked to the business, are they relevant to taxable supplies, one of the key conditions for claiming input tax?

In this briefing, I’ll consider the hurdles that need to be overcome to make a valid claim, giving examples of important case law that have exercised the little grey cells of the tribunal judges for many years.