Frank A Smart & Sons Limited v. Her Majesty’s Revenue and Customs


Addleshaw Goddard acted on behalf of Frank A Smart & Sons Limited against Her Majesty’s Revenue and Customs before the Supreme Court.

Mr Frank Smart is the sole operator and director of the agricultural business which operates in the Aberdeenshire area and alongside his wife, also runs a farm near Torphins which is leased to FASL.

The Supreme Court unanimously dismissed the appeal lodged by HMRC after the government body refused to allow the respondent to deduct VAT of more than £1 million after acquiring 34,477 units of Single Farm Payment Entitlement (SFPE) between 2007 and 2012.

Issued by the Scottish Government in accordance with the European Union Single Farm Payment (SPF), the units were tradeable and entitled taxpayers to various discounts and access under farming law.

FASL took advantage of SFPE and used the units to grow its business, including establishing a windfarm, constructing farm buildings and purchasing neighbouring farms.

Following unsuccessful appeals to the Upper Tribunal and to the Inner House of the Court of Session by HMRC, the Supreme Court also ruled that when FASL incurred the costs of the SPFE units, it was acting as a taxable person because it was acquiring assets in support of its current and planned business activities.

On that basis, FASL was entitled to an immediate right of deduction in the VAT paid on the purchase of the SFPE units and is entitled to retain that deduction so long as it used the SFPs which it received as cost components of its business activities.

Simon Catto, partner and head of dispute resolution in Scotland at Addleshaw Goddard advised Frank A Smart & Sons Limited.

Glyn Edwards, VAT director at MHA MacIntyre Hudson, also advised FASL in the action.

Involved fees earner: Simon Catto – Addleshaw Goddard;

Law Firms: Addleshaw Goddard;

Clients: Frank A Smart & Sons Limited;