RevenueValue added tax - deductibility of input tax - out-of-country supplies to be excluded from calculationCustoms and Excise Commissioners v Liverpool Institute for Performing Arts: HL (Lord Slynn of Hadley, Lord Cooke of Thorndon, Lord Hope of Craighead, Lord Millett and Lord Scott of Foscote): 23 May 2001Supplies of advertising services which the taxpayer made to a German company were treated as out-of-country supplies which did not attract value added tax.In calculating its recoverable input tax attributable to taxable supplies the taxpayer used the partial exemption recovery formula in regulation 30(2)(d) of the Value Added Tax (General) Regulations 1985 and included the supplies made to the German company.The Customs and Excise Commissioners held that those supplies were to be excluded from the calculation.

A value added tax tribunal allowed the taxpayer's appeal and the judge upheld the tribunal's decision.

The Court of Appeal allowed the commissioner's appeal.

The taxpayer appealed.Roderick Cordara QC and Perdita Cargill-Thompson (instructed by Crockers Oswald Hickson) for the taxpayer; Kenneth Parker QC and Philippa Whipple (instructed by the Customs and Excise Solicitors) for the commissioners.Held, dismissing the appeal, that regulation 30(2)(d) of the 1985 regulations provided that 'there shall be attributed to taxable supplies such proportion of the input tax on such of those goods or services as are used or to be used by [the taxpayer] in making both taxable and exempt supplies as bears the same ratio to the total of such input tax as the value of taxable supplies made by him bears to the value of all supplies made by him in the period'; that that was dealing with residual input tax and prescribed a value-based method of apportionment; that 'taxable supplies' and 'all supplies' in regulation 30 must be limited to supplies in the UK which were taxable and must therefore exclude exempt supplies, out-of-country supplies and supplies made otherwise than in the course or furtherance of a business; and that it did not include out-of country supplies which would, if made in the UK, have been taxable.

(WLR)