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Upper Tribunal rules on Capital Goods Scheme in Leaseback cases

11 May 2011

In one of Sir Stephen Oliver's last decisions, the Upper Tribunal has, for the first time, dealt definitively with the Capital Goods Scheme (CGS) under the VAT General Regulations 1995. In the context of a leaseback scheme, the Upper Tribunal applied the ECJ's ruling in Case C-275/01 Sinclair Collis v HMRC and found that payment of rent is an essential component for a lease under the applicable Community law definition. The President then went on to explain the practical calculation of CGS under the Regulations and to find that the relevant change of use was to be determined as a matter of fact in all the circumstances. On the facts of this appeal it was held that there had been a change of use (from leasing activity) and that that change was total, requiring a 100% repayment from the Appellant. Appeal from the First-tier Tax Tribunal dismissed.

Philip Moser of Monckton Chambers acted for the successful Respondent, HMRC.

To read the judgment, please click here.

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Philip Moser QC