VAT Tribunal Success

Congratulations to fellow MHA member Glyn Edwards on his recent VAT Tribunal success.

HMRC challenged the view that VAT can be recovered on costs that generate non-business income. The case in question considered the rights of farmers to reclaim VAT on the purchase of single farm payment entitlements.

HMRC argued that the VAT incurred on these purchases had a direct and immediate link to the subsidies which they earned through ownership. It was accepted that the subsidies were outside the scope of VAT and HMRC argued related VAT was not recoverable.

The court rejected this argument, stating that the key test was how the income from the subsidies was to be used. In this case, the income was invested in their taxable farming activities.

This decision has a wider view and may stop HMRC in their tracks from challenging subsidies in the renewable energy industries. The decision will also assist arguments going forward in the not-for-profit sector, where HMRC take the view that VAT cannot be claimed on costs which generate non-business income; this may now be over-restrictive.

If you would like to hear more about this case or discuss any other VAT issues please contact our VAT specialist, Nigel Smith on 0191 285 0321 or