# UK Supreme Court VAT win could be good news for charities

- Link: https://fundraising.co.uk/2019/08/01/uk-supreme-court-vat-win-could-be-good-news-for-charities/
- Published: 2019-08-01T09:16:28+01:00
- Author: Melanie May

**A UK Supreme Court win could signal relief for charities looking to recover VAT,
accountancy firm MHA MacIntyre Hudson has said.**

The Supreme Court’s decision in favour of Frank Smart & Sons Ltd regarding VAT repayment
on the purchase of farm entitlements to CAP subsidy, could mean HMRC will find it
more difficult to refuse VAT recovery on charitable fundraising activity in the 
future, it claims.

Frank Smart & Sons Ltd, a family owned farming company in Aberdeenshire won its 
case against HMRC regarding the claim for the repayment of VAT on the purchase of
34,477 units of Single Farm Payment Entitlements to subsidy.

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HMRC refused the claim on the grounds that there was a direct link between the purchase
of the entitlements and the receipt of subsidy. As the subsidy was outside the scope
of VAT the claim for VAT repayment failed the test that input tax must be linked
to a VATable supply.

Frank Smart & Sons Ltd was advised by Glyn Edwards, VAT Director at [MHA MacIntyre Hudson](https://www.macintyrehudson.co.uk/),
who argued that VAT ought to be recoverable because the subsidies were used to develop
the farming business. This argument prevailed, resulting in the unanimous decision
of the Supreme Court.

Glyn Edwards commented:

> “If HMRC had won, every business in receipt of subsidy could have been subject
> to a restricted right of VAT recovery. The Supreme Court’s judgment suggests that
> if it can be shown the purpose of incurring costs goes beyond the immediate non-
> VATable supply, for example in order to generate funds to expand a taxable business,
> then some VAT recovery is possible. This is a significant development in the VAT
> landscape.
> “For the not-for-profit sector in particular, the judgement is a helpful panacea
> against the recent decision of the Court of Justice of the EU in University of
> Cambridge v Revenue and Customs Commissioners (C-316/18). HMRC would have taken
> that judgment as a green light to refuse VAT recovery on any fund-raising activity
> of a charity irrespective of how those funds are to be used.
> “In the context of Brexit, the Supreme Court’s decision could be a sign of things
> to come. The Supreme Court declined to send Frank Smart’s case to the CJEU and
> were bold in making a decision in his favour so soon after the CJEU released the
> Cambridge judgement.”

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