An investment company that bought the property portfolio of Toys R Us in 2018 has failed in a bid to claim a £3.5m VAT credit from HMRC.
According to ruling made by a specialist tax tribunal earlier this month, Bollinway Properties bought the portfolio for just over £355m and subsequently claimed a VAT repayment of around £71m.
Bollinway and Toys R Us were connected companies, according to the ruling. They were both controlled by a company called Acepark Ltd, which had bought Toys R Us for £1 from the receiver. Instead of asking for repayment of the VAT directly, Bollinway asked HMRC to offset it against Toys R Us’s unpaid VAT bill, which it did.
However, Bollinway has since claimed that it is owed a supplementary payment of £3.5m as a penalty for slow repayment of the VAT.
Its lawyers are citing section 79 of the VAT act, which allows a 5% uplift if payment isn’t made within a “relevant period”.
Lawyers for HMRC opposed the request, saying it would generate a “windfall” for the company. Giving judgment, judge Tracey Bowler from the tax chamber of the First Tier Tribunal backed HMRC.
She said section 79 referred to a payment or refund. As Bollinway gave its VAT refund to Toys R Us, it also “assigned” Toys R Us the right to claim the refund.
“As a result of the assignment, Bollinway was no longer entitled to claim the repayment supplement,” she said in her ruling.
She gave the parties 56 days to consider whether they want to file an appeal.
