Farmer’s VAT Flat Rate Success

An argument about whether a farmer is entitled to use the Farmers’ VAT Flat-rate Scheme has finally been settled after going right through the UK appeal process and all the way to the Court of Justice of the EU.

The good news is that Shields & Sons Partnership (Case C-262/16) have succeeded in arguing that HMRC’s criterion for excluding them from the scheme was contrary to European law.  Hopefully HMRC will now issue updates to published guidance to avoid any more arguments on this point.

It will now be important to check that any farming clients have not been losing out by also having the farmer’s flat rate scheme withdrawn from them.  This special scheme for farmers, which is not the same as the general Flat Rate Scheme, was withdrawn from Shields & Sons Partnership on the grounds that –

“ the earnings derived from the application of the flat-rate compensation percentage substantially exceeded the input tax which [the Partnership] would have been able to deduct if it had been subject to the normal VAT arrangements”.

Whereas one of the questions answered by the CJEU was that HMRC were not entitled to exclude farmers who are recovering substantially more as members of the flat-rate scheme than they would if they were VAT registered.

It will be interesting to see how HMRC respond to the ruling but in the meantime anyone who has either been refused entry into the farmers’ scheme or made to leave it may be able to reapply.

Posted in Relief, VAT Appeals.