Tax cases: VAT

The Tax and Chancery tribunal decision applying the CJEU ruling in the case of Shield and Sons Partnership has been issued

The long-running case concerned the exclusion of farmers from the agricultural flat-rate scheme when they recover substantially more by using the flat-rate scheme than the input tax claimable through VAT registration. 

The Court of Justice of the European Union (CJEU) ruled that:

  1. Article 296(2) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as laying down exhaustively all the cases in which a member state may exclude a farmer from the common flat-rate scheme for farmers. 
  2. Article 296(2) of Directive 2006/112 must be interpreted as meaning that farmers who are found to be recovering substantially more as members of the common flat-rate scheme for farmers than they would if they were subject to the normal value added tax arrangements or the simplified value added tax arrangements cannot constitute a category of farmers within the meaning of that provision.’ 

The upper tier tribunal ruling following the CJEU decision (that recovering more under the scheme did not constitute a different category of farmer) allowed for the flat-rate scheme to be reinstated from the date it was withdrawn by HMRC (2012), awarded costs to Shield and Sons and directed that Shield and Sons apply the 4% flat-rate addition invoices to VAT-registered customers retrospectively as if the scheme had not been withdrawn. 

Read more about this decision and others.