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Frank A Smart & Son Ltd v CRC, Upper Tribunal (Tax and Chancery Chamber), 18 March 2016
Input tax on purchase of SFP units is deductible
The taxpayer bought units of single farm payment (SFP) entitlements and claimed repayment of input tax on them (VATA 1994, s 24). HMRC refused the claim, saying the purchase had not been made for the purposes of the business.
The First-tier Tribunal disagreed. It found there was a necessary and direct link between the input tax and future taxable supplies. The purchasing of the units was a funding exercise and related to business overheads. HMRC appealed.
The Upper Tribunal supported the First-tier Tribunal decision. The judge accepted the taxpayer’s contention that the acquisition of the units was a cost component of the business’s taxable supply and formed part of its general economic activity.
HMRC’s appeal was dismissed.
