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 Upper Tribunal and Court of Session disagreed finding there was a necessary and direct link between the input tax and future taxable supplies. HMRC appealed to the Supreme Court.

Lord Hodge gave the judgment with which the other justices agreed. He considered that when the taxpayer incurred the costs of the SFP units it was acting as a taxable person because it was acquiring assets in support of its current and planned economic activities – farming and the wind farm. On that basis it was entitled to an immediate right of deduction of the VAT paid on the purchase of the SFP units and...