No taxable related supplies

The business a husband and wife (Mr and Mrs K) partnership owned properties some of which had an option to tax in place and others did not. In 2009 the partners decided to set up a DIY livery business at Jesse Farm. Between 2009 and 2013 a lot of building work was carried out at the farm including repairs to barns.

A dispute arose about the input tax associated with the repairs. HMRC said this should be exempt because it was linked to the rental income earned from the livery business. The taxpayer agreed that the input tax was attributable to the exempt supply of licensing the farm to the livery business but said a partial credit should be allowed as residual input tax. Mr K argued that it had always been his intention to use the premises as a working farm to generate...