Appeal By The Commissioners For Her Majesty's Revenue And Customs Against A Decision Of The Upper Tribunal In An Appeal By Frank A Smart & Son Limited
| Jurisdiction | Scotland |
| Judge | Lord Drummond Young,Lord Brodie,Lord Menzies |
| Neutral Citation | [2017] CSIH 77 |
| Date | 08 December 2017 |
| Docket Number | XA55/16 |
| Court | Court of Session |
| Published date | 08 December 2017 |
EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
[2017] CSIH 77
XA55/16
Lord Menzies
Lord Brodie
Lord Drummond Young
OPINION OF THE COURT
delivered by LORD DRUMMOND YOUNG
in the appeal to the Court of Session
by
THE COMMISSIONERS FOR HER MAJESTY’S REVENUE AND CUSTOMS
Appellant
against
a decision of the Upper Tribunal dated 21 January 2016
in an appeal by
FRANK A SMART & SON LIMITED
Respondent
Appellant: Young QC, Anderson; Office of the Advocate General
Respondent: Small; HBJ Gateley
8 December 2017
[1] The respondent taxpayer is a company that carries on a farming business in
Aberdeenshire. The taxpayer has claimed repayment of value added tax amounting to
£1,054,852.28 which was paid on its purchase of 34,477 units of Single Farm Payment
Entitlement (“SFPE”). Those units are issued by the Scottish Government in accordance
2
with the European Union Single Farm Payment (“SFP”) scheme, a scheme which makes
provision for the payment of agricultural subsidies throughout the European Union. The
SFPE units purchased by the taxpayer entitled it, on fulfilling specified conditions, to obtain
benefits under the SFP scheme. The units are tradeable. The critical question in the appeal
is whether the SFP units were services used or to be used for the purposes of the taxpayer’s
taxable business supplies, so as to entitle it to repayment of the value added tax charged on
them. The taxpayer made a claim to such repayment, but this was refused by HMRC. The
taxpayer appealed to the First-tier Tribunal, where its claim to repayment was successful.
HMRC appealed to the Upper Tribunal, but the appeal was refused. HMRC has now
appealed to this court against the decision of the Upper Tribunal.
Facts
[2] The First-tier Tribunal made detailed findings in fact at paragraph 38 of its decision.
It was noted both by the First-tier Tribunal and on appeal by the Upper Tribunal that those
findings were not generally controversial. They were as follows:
(a) The taxpayer company is wholly owned by Mr Frank Smart, who is its sole
director. He and his wife are the whole partners of “Mr and Mrs Frank Smart,
trading as Tolmauds Farm”, which owns the farmland there. The farm extends to
about 200 hectares and is leased by the taxpayer for £30,000 per annum.
(b) The taxpayer receives Single Farm Payments (SFPs). These are agricultural
subsidies paid by the Scottish Government. At the inception of the scheme in 2005
UK farmers received initial units of entitlement without consideration. These were
tradeable and a market in them developed. To claim the SFP in respect of one unit
the farmer must have one hectare of eligible land at his disposal on 15 May of the
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