The law in relation to Value Added Tax or ‘VAT’ confers a right to deduct the VAT paid on input expenditure for business activities. During the period 1974-1997, NHS Lothian had operated a number of scientific labs which undertook some business activities. NHS Lothian did not reclaim the input VAT paid in respect of those years until after the enactment of section 121 of the Finance Act 2008, which provided that claims for recovery of input tax incurred in accounting periods ending before 1 May 1997 could be made without any time limit provided that the claim was made before 1 April 2009. NHS Lothian’s claim for repayment of the overpaid tax was rejected by HMRC.
The First-tier Tribunal and the Upper Tribunal dismissed NHS Lothian’s appeals. On appeal to the Inner House of the Court of Session, NHS Lothian argued, relying on the EU law principle of effectiveness, that the First-tier Tribunal had erred by refusing the claim in its entirety on the basis that the evidence available was insufficient to allow for proper quantification of the claim. The Inner House allowed the appeal, set aside the First-tier Tribunal’s decision, and remitted the case to a differently constituted tribunal for reconsideration. HMRC now appeals to the Supreme Court.

Tump Farm is a working dairy farm which has been farmed by the Guest family since 1938. The first appellant, David is married to the second appellant, Josephine. The respondent, Andrew is their eldest son. Andrew left school in 1982, aged 16 and worked full time at the farm for 33 years until 2015. 

                Relations between Andrew and his parents deteriorated. In 2014, David and Josephine made wills excluding any entitlement for Andrew. In 2015, David and Josephine offered Andrew terms for carrying on farming Tump Farm under a farming business tenancy. Andrew rejected those terms on grounds of affordability and left the farm that year. 

                In 2017, Andrew started legal proceedings seeking a declaration of entitlement to a beneficial interest in Tump Farm under the principles of proprietary estoppel. The judge at first instance ruled in his favour finding that an assurance was made to Andrew over many years that he would inherit a substantial share of the farm which he had relied on, working hard on the farm for little financial reward. He ordered that David and Josephine make a lump sum payment to Andrew of 50% of the market value of the farming business and 40% of the market value of Tump Farm. The consequence of that order was that Tump Farm would have to be sold in order to realise the lump sum payable to Andrew. David and Josephine appealed to the Court of Appeal where their appeal was dismissed.