Input tax recovery on farming subsidies – Supreme Court

This appeal is concerned with the entitlement of a taxpayer to deduct input VAT and claim repayment of surplus input VAT. It concerns the interpretation of articles 167 and 168(1) of Council Directive (EC) 2006/112/EC of 28 November 2006 on the common system of value added tax (“the Principal VAT Directive” or “the PVD”) and the case law of the Court of Justice of the European Union (“CJEU”) relating to those articles. In short, the question is whether a taxpayer can deduct as input tax the VAT which it has incurred in purchasing entitlements to an EU farm subsidy, the Single Farm Payment (“SFP”). The taxpayer has used those entitlements to annual subsidies over several years and intends to use money resulting from the receipt of those subsidies to fund its current and future business activities, which currently involve only taxable supplies.