Appellant purchasing land at auction and paying deposit – Sale being transfer of part of business as going concern – Appellant making election in respect of property and notifying Commissioners – Completion taking place – Tribunal finding appellant not making election by relevant date so liable for VAT – Whether supply at date of auction or date of completion – Article 5 of Value Added Tax (Special Provisions) Order 1995 – Appeal dismissed
In December 1997 the appellant (HESA) contracted to purchase freehold land from Royal & Sun Alliance Insurance plc (RSA) at a public auction and paid a deposit to the auctioneers as agents for RSA. The property was an asset of RSA’s business. The sale, being a transfer of a business as a going concern, would fall outside the scope of VAT provided that HESA made an election, known as an “option to tax”, in repect of the land and notified the Commissioners. On 23 December HESA made an election in respect of the property and notified the Commissioners accordingly. In January 1998 completion took place and the balance of the purchase price was paid.
Article 5(2) of the Value Added Tax (Special Provisions) Order 1995 stated: “a supply of assets should be treated as neither a supply of goods nor a supply of services… unless the transferee has made an election in relation to the land concerned which has effect on the relevant date and has given any written notification of the election… no later than the relevant date”. Article 5(3) defined “relevant date” as “the date upon which the grant would have been treated as having been made or, if there is more than one such date, the earliest of them”. The VAT and Duties Tribunal found that the relevant date was the date when HESA paid the deposit to the auctioneer, by which time HESA had not made its election and was, therefore, liable to pay VAT in respect of its purchase of the property.
HESA appealed contending that the relevant date was the date when the grant actually took place, namely the date of completion. It submitted that a chargeable event did not occur before that date because it was only then that the property was made available to it, and the legislation distinguished grant from supply. HESA further submitted that section 6 of the Value Added Tax Act 1994 (the time of supply provisions) had no application when there had, in fact, been no taxable supply. Finally, it submitted that the words “if there is more than one such date, the earliest of them” in Article 5(3) had no application to the present case and only applied where the supply of assets of an ongoing business consisted of a number of grants of land.
Held: The appeal was dismissed.
Article 5(3) required an assumption that a taxable supply consisting of a grant of property had taken place. There was no distinction between grant and supply. Second, the article required the application of section 6 of the 1994 Act for the purpose of determining the time of that hypothetical taxable supply. Third, the article contemplated more than one deemed date of supply in respect of only one grant. Accordingly, the relevant date was the date on which HESA paid the deposit. Since HESA had not made its election on or before that date, it was liable to pay VAT.
Rupert Baldry (instructed by Willans, of Cheltenham) appeared for the appellant; Peter Mantle and Owain Thomas (instructed by the solicitor to Customs & Excise) appeared for the respondent.
Sarah Addenbrooke, barrister