The decision has recently been published in a European Court of Justice case, Shields and Sons Partnership v the Commissioners for HM Revenue & Customs. The case revolved around the authority of HMRC to remove the partnership from the VAT flat rate scheme for farmers. It is reported that the partnership had benefited over 7 years from using the scheme to the tune of £374,884.23. In most situations the VAT flat rate scheme offers little or no advantage as the 4% of turnover which the farmer receives from using the scheme seldom equates to the amount of input VAT which he is precluded from recovering. In the Shields case it is reported that the appellant reared cattle purchased from an associated company before selling them to a processor. In these circumstances it may be presumed that the majority of the VAT carrying expenses were incurred by the company providing the calves. It was held that HMRC had no general discretion to remove individual farmers from the scheme.
For the report of the case visit:-
To view HMRC’s VAT Notice 700/46 dealing with the scheme go to :-