In Colin Newell v HMRC [2021] TC08149, the First Tier Tribunal (FTT) found that the receipt of subsidy income by a biomass business did not restrict input VAT recovery.

HMRC's view was that Mr Newell was carrying on an activity that gave rise to income: some of which was taxable and some outside the scope of VAT. Accordingly, input VAT recovery should be restricted to the extent that the VAT incurred was attributable to the taxable supplies.

Mr Newell argued that the PSPs were received without having conducted any activities outside the scope of VAT. All of his activities were taxable and so there should be no restriction to input VAT recovery. 

The FTT allowed Mr Newell’s appeal:

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Colin Newell v HMRC [2021] TC08149

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