The First Tier Tribunal (FTT) has dismissed an appeal from Grantham Ceilings & Interiors Ltd (GC) against HMRC’s decision to refuse its £268,429.63 input tax claim on supplies from an associated company, ruling GC’s conduct as ‘dishonest’ as it knew that the associated company could not pay its VAT liabilities.

GC was a long-established company trading in the construction sector and was registered for VAT since 1994. In 2016, on advice from their accountant, an associated company called Holdings was set up to ring-fence GC from employment status claims by subcontractors. They had the same directors and operated from the same premises.