Charities do not have to charge VAT when selling donated items. Until now, animals were considered donations only if they were directly handed over by their owners, meaning sales of strays incurred VAT.
The case, brought successfully by Plymouth-based Gables Farm Dogs' and Cats' Home, invoked the common-law principle of 'finders keepers' to confer ownership on people who find strays and give them to a rehoming centre. Many charities will now be able to make retrospective VAT claims on sales of strays.
"It's a remarkable coup for a small home," said Tony Harris, general manager at Gables Farm. "The judgement will benefit charities around the country."
Gales Farm is owed £20,000 in backdated claims. The Dogs Trust estimates that it is owed £100,000.