David John Jones v Her Majesty's Revenue & Customs

Facts

The appellant, Mr David John Jones, is a sole trader who designs and manufactures tools for the building trade under the trading name "Advanced Pro Tools", and was registered for value added tax with effect from 1 August 1999. Some years earlier he had set up a company called Excalibur Hand Tools Ltd, having invented a specialised tool and consulted a solicitor, Mr Hugh James, to draw up an agreement to license and patent the product. The company was bought out by its directors and later became insolvent; the Official Receiver sold the assets to Gary Lewis, a former director, and to Max Halliday, and a new company, Excalibur Hand Tools 2, was set up. Mr Jones was unable to recover what he considered to be his rightful property in the patents and licences. In 1999 he appointed a new solicitor and brought proceedings against Max Halliday, trading as "Excalibur Hand Tools", and Excalibur Hand Tools Ltd (by then known as ProofIncome Ltd), beginning in the Patents County Court and later transferred to the Patents Court in the Chancery Division of the High Court. That action was settled on terms that Mr Jones pay £20,000 as a contribution to the defendants' costs and his claim be dismissed. The Commissioners refused his claim to recover input tax on the value added tax element of that payment, and he appealed.