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No VAT Refund on £298,000 Power Boat Purchase

An astute businessman who bought a £298,000 power boat in the hope of winning catering contracts for glamorous offshore racing events has failed to convince a tax tribunal that the purchase was part of an economic venture on which he could reclaim VAT input tax.

After making a substantial fortune in the restaurant trade, the businessman had developed an interest in power boat racing, in which he had done well competitively. He had reclaimed more than £31,000 in input tax on the basis that he viewed catering for world championship events as a gap in the market and had bought the boat in the belief that it would assist him in obtaining such deals.

In resisting the claim, HM Revenue and Customs (HMRC) argued that power boat racing was the businessman’s ‘private leisure interest’ and that it had not been established that the vessel had been acquired for the purpose of furthering a business or economic activity.

The First-tier Tribunal accepted that the businessman believed that the boat’s purchase would further his catering ambitions. However, in dismissing his appeal, it noted that those hopes had in the event come to nothing and that, for more than two years, the boat had been standing in his driveway, unused.

Describing the boat’s acquisition as a ‘dicey proposition’, the Tribunal compared it to buying a lottery ticket, which could not be viewed as a business venture. It was unlikely that the businessman would have thought that owning such a vessel was the key to winning catering contracts and the Tribunal was unconvinced that he had bought it with ‘any more than a hope of success’.