But there is another way of looking at it, which is that principles of tax law and practice go in and out of fashion. Under this world-view, a legal principle may only have a shelf life, and you have to make the best of any opportunity it may offer while that opportunity lasts, or miss out on it altogether. This view is supported by the notion that any precedent set by courts can be effectively repudiated without saying it is wrong, simply by distinguishing cases on the facts. Accordingly, a decision which promised to create support for a wide range of similar propositions, and for a while probably does just that, becomes increasingly restricted to application to itself alone, as though it were an extinct species.

 

There may be elements of truth in both approaches but I am increasingly inclining towards the second. The issue of where costs incurred by a business can be subject to VAT recovery in cases where the benefit of such costs also applies to other parties, is a case in point.

 

The high tide was the case of Redrow. This house builder contracted with estate agents to sell, not its own houses, but those of its prospective customers. This was not merely a perk for the customer, but a way of ensuring that Redrow had a measure of control over its commercial position, since their own sale was dependent on the prior house sale by their prospective customer. HMRC said that they could not claim the VAT because the estate agency service was provided to the customer, even though Redrow made payment. The House of Lords disagreed. There was a business use of the costs and the VAT could be reclaimed. Advisers were delighted and a bit surprised. How could we apply "Redrow" to other analogous cases?

 

Two of several that have presented themselves over the years have been costs of rewarding customers for their custom, and the very different example of costs incurred by businesses seeking refinancing, where the services were required to be obtained by the financing consortium.

 

Taking the first example, where, say, a vendor awards reward goods which are different to their own product, and incurs the cost of buying these, the hope used to be that, even though the final consumer alone owns these products, the products also perform a marketing function for the vendor of the principal goods and that the input tax is justifiable on that basis (without corresponding output tax). There are strong economic arguments in favour of this. It means the tax burden is restricted to the actual level of consideration achieved on the business activity. But the ECJ has recently rejected that analysis (LMUK and Baxi), thus calling the Lords decision in Redrow into doubt.

 

The second example has often presented a sparring ground between tax payers and HMRC. When a business needs refinancing, the finance providers require work to be done, at the target business's expense, to prove the viability of their investment. This has long been treated as a cost proper to the financiers even though the latter are able to pass it on in charges to the target company. But Redrow suggested that this need not be so. As long as the adviser is contracted by the target company as well as the financiers, then that should be sufficient to allow input tax recovery. But cases have not been easy to win on this principle. In Telent it was thwarted by the fact that the adviser rejected the view that Telent itself had hired its services. So, it was with some relief that we saw success in the case of Air Tours where the advisers agreed that they had made a supply to the target company. The First Tier Tax Tribunal, having reviewed all the facts, came down in favour of it making an input tax claim. At last, the Redrow principle seemed to have applied to this scenario where the facts permitted it. But euphoria has been short lived. The Upper Tier Tribunal has recently overturned that decision, and has refused to apply Redrow. Their decision seems to me frankly to suggest that the facts in Redrow were very different and particular to a house builder's trade. Unless this view is unseated on further appeal, we have the real prospect that Redrow will become marginalized as a legal principle, and become the proverbial foot note in history.

 

This story is far from over, but if I were a betting man my money would now, sadly, be on the tide of this helpful legal principle being in full ebb, at least until the fashion for it might return.