Babylon Farm Ltd v HMRC

In Babylon Farm Ltd v HMRC [2021] UKUT 224 (TCC) (8 September 2021) the Upper Tribunal (UT) dismissed the taxpayer’s appeal finding that the taxpayer was not entitled to recover VAT that it had incurred during a period of approximately three years from May 2014 mainly on the cost of building a new barn to store machinery to carry out a hay making activity.

The land on which the hay was grown belonged to the directors a husband and wife who controlled the taxpayer. The hay making activity generated annual income of less than £500 with the only customer being one of the directors. The taxpayer had been registered for VAT since 1991 and the hay making activity was the remains of a farming business it had previously carried on.

Although HMRC had disallowed the claim for input tax on the basis that it did...

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