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A farmer’s wife has been celebrating following a successful appeal against a decision made by HM Revenue & Customs. Danielle Forster almost lost her bed and breakfast business after HMRC tried to combine the income from her business with that of her husband and son, making her liable to pay VAT.

HMRC made the decision that the separation of the businesses was artificial, and lumped the turnover from the bed and breakfast together with the income from her husband’s farming business. This took her annual turnover above the VAT threshold, which is currently £73,000. Fighting on Mrs Forster’s behalf, CCH Fee Protection labelled the decision made by a London VAT tribunal as “ground breaking”.

The bed and breakfast has been run since the 1970s by Mrs Forster separately to the farm, in which she is a sleeping partner. Annual turnover for the B & B is below the threshold and therefore exempt from VAT. Previously, HMRC had accepted that the two businesses were separate, but the latest visit from an HMRC official resulted in them being combined together. The VAT litigation expert from CCH, Glyn Edwards said that the official from HMRC had ignored the fact that the businesses were separate and had been unreasonable.

HMRC retaliated by saying that the ruling wasn’t ground breaking and was just one decision made by the tribunal in relation to a specific case. A spokesperson for HMRC said:

“HMRC applies the rules fairly and consistently in all cases where we believe that a single business has been artificially separated to ensure that the right amount of VAT is paid on all taxable supplies.”

About The Author

Gary Fields

Content Writer working alongside our expert accountants to bring you the latest Tax and Accounting news.

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