[co-author: Róisín Cronin]
A recent Tax Appeals Commission decision denied VAT input credit on the surrender of an option agreement related to a residential letting business. The Appellant argued that the VAT should be recoverable because the surrender was preparatory to a future taxable sale. Revenue disagreed, stating that VAT recovery depends on actual use at the time of cost - not future intentions.
The Commissioner upheld the Revenue’s position, emphasising that VAT deductibility requires objective evidence of taxable use when the expense arises. No documentation supported the Appellant’s claim of intent to sell, and the property was used for residential letting, a VAT-exempt activity. The surrender was deemed a supply of services linked to exempt use, not a taxable transaction.
Key takeaway / recommendation
VAT recovery must be supported by objective evidence of taxable use or intended use at the time of cost. Businesses should maintain clear documentation of commercial intent and ensure that input VAT relates directly to taxable supplies. Future plans alone are insufficient—actual use drives deductibility.
[View source.]
