In D & J Grant v HMRC2, the FTT dismissed the taxpayer’s appeal and held that a buyer of goods was not entitled to recover input tax in relation to amounts paid under a sale contract constituting only 70% of the purchase price, as title was only to pass on payment of the final instalment and the goods were not delivered. In the view of the FTT, the absence of title passing meant that there was no supply for VAT purposes.


D & J Grant (the taxpayer), entered into a purchase and sale agreement on December 2012 with Free Breeze Energy Systems UK Ltd (FBE), for the supply of two wind turbines. 70% of  the purchase price plus VAT had been settled by February 2013 and the remaining 30% of the purchase price was scheduled to be paid on inspection after delivery. The purchase order had not been placed by FBE until March 2013, when it entered into a creditors voluntary liquidation.

In October 2014, in response to an enquiry raised with respect to input tax recovery in relation to payments made to FBE, HMRC stated that in the absence of title passing, there was no “supply” for VAT purposes. In HMRC’s view, title would not pass until the full amount of the purchase price had been paid. This view was upheld on review and the right to deduct input tax was denied.

The taxpayer appealed HMRC’s decision.

FTT’s decision

The FTT concluded that the legal title did not pass with payment of only 70% of the price. Therefore, the taxpayer could not reclaim the input tax and the appeal was dismissed.


The FTT held that the absence of title passing meant that there was no taxable supply for the purposes of section 4, VATA.

This decision may be contrasted with that in David Peters Ltd v HMRC3, in which there was a supply because payment was made in full and title passed despite a lack of delivery. In evaluating the commercial risk of goods not materialising and title not passing, for example, due to the seller’s insolvency, potential buyers should factor in the cost of the denial of input tax.

A copy of the decision can be found here.