A private pension scheme has been hit with a £73,000 tax bill on its purchase of land in Peterborough.
The High Court upheld a November 2005 VAT Tribunal decision that the directors’ pension scheme for insurance broker Marlow Gardner & Cooke had to pay VAT on the deal, because the vendor had elected to waive an exemption from tax.
The scheme was handed the bill by vendor Net Support after buying the property unit A in Boon Court, Papyrus Road, Werrington for £420,000 in January 2004.
It challenged Net Support’s waiver of tax because it was made in writing to Revenue & Customs one month after the sale agreement was completed, and claimed that the vendor was not the taxable person at the date of notification.
However, Mann J ruled that the notification to waive exemption made after Net Support had sold the unit was still effective.
He added that sufficient evidence existed upon which the tribunal could conclude that an election to waive had taken place prior to notification, including the fact that Net Support had charged VAT on rent for the property since October 1998.
“That act is consistent with a desire to bring the property within the VAT regime, and to claim to take it out of the exemption,” he said.
Although a sale or letting of land will not normally attract the addition of VAT, the Value Added Tax Act 1994 allows taxpayers a right to take properties out of the exemption, thereby allowing them to charge VAT on rent.
Marlow Gardner & Cooke Ltd Directors Pension Scheme v Commissioners of Revenue & Customs Chancery Division (Mann J) 30 June 2006.
Eamon McNicholas (instructed by Hunt & Coombs, of Peterborough) appeared for the appellant; Robert Kellar (instructed by the legal department of Revenue & Customs) appeared for the respondents.
References: EGi Legal News 03/07/06
