In Newmafruit Farms Ltd v HMRC [2019] TC 7254, the First Tier Tribunal (FTT) decided that a farm could not claim back input tax on professional fees relating to a loan. The fees related to an exempt supply of lending money and not to the farming trade.

A fruit farm invested its cash reserves with Mr Alan Pither, a property entrepreneur.

  • The farm believed that Pither defrauded them and brought High Court proceedings which were eventually settled.
  • The issue was whether the farm could claim VAT input tax on the professional fees in those proceedings.

The Tribunal agreed with HMRC that the fees were incurred in relation to the exempt supply of providing a loan and not with the general business of the farm.


The farm used two arguments:

  • It said it recovered only part of its capital and none of the interest. Therefore, there was no consideration and thus no contract and no supply.
    • The tribunal held that a contract is made when an offer is accepted, not when the contract is executed or breached.
  • It then argued that Pither had no intention of honouring the agreement, so there never was a genuine agreement.
    • This was dismissed on similar grounds.


Partial exemption & input VAT
How do you calculate the amount of input tax you can recover under the VAT partial exemption rules? What are the de minimis rules?

External link

Newmafruit Farms Ltd v HMRC [2019] TC 7254