The appeal related to whether a taxable person, who has received supplies of services which were at the material time treated by Royal Mail as exempt under Value Added Tax Act 1994, but which were properly chargeable to VAT under the Sixth VAT Directive or Principal VAT Directive, is entitled to an input tax credit in respect of those supplies.

The Upper Tribunal confirmed that Royal Mail supplies that were wrongly exempted are not liable to deductible input tax seemingly because of the lack of the needed tax invoices. CTG understands that some charities have considered such claims and would welcome any feedback from members on this point.

The full judgment can be read here. This decision was appealed, but the Court of Appeal has unfortunately held in favour of HMRC.