Businesses are separate

The taxpayers were a married couple and their son. They owned a farm with a farmhouse. Mrs F began running a bed and breakfast business in 1975 and was not involved in the farm.

It operated independently from the farm and always traded below the VAT threshold. Mrs F had her own bank account and all the expenses of running the bed and breakfast business were funded by her including the price of cleaning paying her accountant and running advertising.

Her husband and son had no involvement in the bed and breakfast business.

Following a VAT inspection HMRC decided there were sufficient financial economic and organisational links between the farm business and bed and breakfast business for them to be treated as one entity.

The taxpayers appealed.

The First-tier Tribunal considered the evidence...