Compound Photonics Group Limited v The Commissioners for HMRC
| Court | First-tier Tribunal (Tax Chamber) |
| Judgment Date | 30 June 2026 |
| Neutral Citation | [2026] UKFTT 985 (TC) |
| Date | 30 June 2026 |
| Year | 2026 |
Neutral Citation: [2026] UKFTT 00985 (TC)
Case Number: TC 09934
FIRST-TIER TRIBUNAL
TAX CHAMBER
Heard in public at Taylor House, London
Appeal reference: TC/2022/11083
VALUE ADDED TAX – Recovery of input tax – economic activity – whether economic activity
ceased when business transferred out of VAT group but Intellectual Property retained –
whether subsequent sale of Intellectual Property constituted economic activity – application of
test set out in Wakefield College v HMRC [2018] EWCA Civ 952
Heard on: 5-6 February 2026
Judgment date: 30 June 2026
Before
TRIBUNAL JUDGE MALCOLM FROST
IAN SHEARER
Between
COMPOUND PHOTONICS GROUP LIMITED
Appellant
and
THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMS
Respondents
Representation:
For the Appellant: Michael Firth KC, instructed by Brian White Tax Resolution Ltd
For the Respondents: Laura Inglis and Rajkiran Arhestey of counsel, instructed by the
General Counsel and Solicitor to HM Revenue and Customs
1
DECISION
INTRODUCTION
1. This is an appeal against two decisions made by HMRC on 18 February 2022:
(1) To raise an assessment for £544,878, disallowing all input tax from VAT periods
03/18 to 12/20 and 06/21 to 12/21; and
(2) To disallow a VAT credit of £11,542 for VAT period 03/21.
2. This decision deals with the questions of
(1) Whether the Appellant company (as representative member of a VAT group)
ceased economic activity for VAT purposes on the sale of its business in May 2017;
and
(2) Whether the subsequent sale of retained Intellectual Property (“IP”) constituted
economic activity.
3. For the reasons set out below, we answer both questions in the affirmative.
THE FACTS
4. We were provided with a hearing bundle of 982 pages. We also heard live evidence from
Mr Geoffrey Rowley (joint administrator of the Appellant), who was cross examined by Ms
Arhestey for HMRC.
5. From that evidence, we find the facts as follows.
6. The Appellant is the representative member of a VAT group comprising itself (“CPGL”)
and two other companies: Compound Photonics Limited (“CPL”), and Compound Photonics
UK Limited (“CPUK”). CPL and CPUK are 100% subsidiaries of the Appellant. We refer to
CPGL, CPUK and CPL collectively as “the UK Group”.
7. CPL owns 100% of a US company, Compound Photonics US Corporation (“CPUS”).
This company is outside the CPGL VAT group.
8. The Appellant voluntarily registered for VAT on an intending trader basis with effect
from 1 January 2011. The Appellant and its subsidiaries were intended to be the vehicle for the
intended development and commercialisation of academic research into gallium arsenide and
liquid crystal technology. The intention was to develop, manufacture and sell a very small
projector.
9. In June 2013, CPUK acquired a large gallium arsenide fabrication plant, located in
Newton Aycliffe in the UK.
10. In May 2017, the UK Group’s operating business in the UK (including the Newton
Aycliffe facility) was sold to a third party (the “May 2017 Disposal”). Certain intellectual
property (“IP”) rights relating to the business are said to have been retained by CPL, we make
more detailed findings in relation to the IP rights later in this decision.
11. CPUS continued its operating business in the USA. This business included continuing
the development of its display technology.
12. On 6 January 2022, the remaining operating assets of the UK Group, including the IP
rights held by CPL, are said to have been sold to Snap Inc for $101m (the “Snap Sale”). We
make more detailed findings on this point later in this decision.
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