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Early last year we informed you about planned changes to the Council Directive on the common system of VAT (2006/112/EC). The proposed Council Directive (EU) 2018/1910 of 4 December 2018 amending Directive 2006/112/EC on VAT is currently in the interdepartmental comment procedure.

Change in the VAT system for the taxation of trade between member states

Effective mid-July 2019, only a company who imports goods into the UK (‘importer of record’) who is also the owner of the goods or has the title to the goods, will be allowed to recover Import VAT (via a C79 certificate) on UK import declarations.

Changes for non-owner importers on import VAT
Wednesday, August 7, 2019

MHA MacIntyre Hudson advises on landmark VAT recovery for farm subsidy entitlement purchases

UK member firm, MHA MacIntyre Hudson, represented Frank Smart & Sons Ltd, a family-owned farming company in Aberdeenshire last week in its successful case against HMRC (HM Revenue and Customs). The case was for the repayment of VAT on the purchase of 34,477 units of Single Farm Payment Entitlements.

Glyn Edwards, VAT Director at MHA MacIntyre Hudson, argued that VAT should be recoverable because the subsidies were used to develop the farming business, ie to build cattle sheds, repay a bank loan and to build a wind farm. The Supreme Court’s decision was unanimous in favour of Frank Smart & Sons Ltd.

Edwards commented: “If HMRC had won instead, every business in receipt of subsidy could have been subject to a restricted right of VAT recovery.

“In farming, the likely impact would have been that VAT recovery would be restricted, in whole or part, on any costs associated with receipt of subsidy. For example, VAT on farming equipment would be at risk if used to keep land in Good Agricultural and Environmental Condition (GAEC), a requirement attached to many subsidies. VAT on professional costs and general overheads would also have been at risk.

“By establishing that subsidy has no role to play in determining VAT recovery, the Supreme Court has asserted an important principle which will protect the true value of subsidy as we move into the post-EU era. In the context of Brexit, the Supreme Court’s decision could be a sign of things to come."

This article is a summary of an article originally published by MHA MacIntyre Hudson and published with their approval.

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