Bollinway Properties Ltd v R & C Commissioners
| Jurisdiction | UK Non-devolved |
| Judgment Date | 12 December 2023 |
| Neutral Citation | [2023] UKUT 295 (TCC) |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2023] UKUT 295 (TCC)
Mr Justice Richard Smith, Judge Vinesh Mandalia
Upper Tribunal (Tax and Chancery Chamber)
Value added tax – Repayment supplement – VATA 1994, s. 79 – Relevant period – Periods left out of account in computing relevant period - Value Added Tax Regulations 1995 (SI 1995/2518), reg. 198 – Purchase of properties – Whether reasonable to request property transfer forms – Yes – Appeal dismissed
In Bollinway Properties Ltd v R & C Commrs [2023] BVC 514, the Upper Tribunal upheld a previous decision of the FTT in Bollinway Properties Ltd and dismissed a claim for repayment supplement finding that the FTT had correctly computed the 30 day relevant period within which HMRC had paid the relevant VAT credit.
Bollinway was part of a corporate group owned by Acepark Ltd, who acquired Toys R Us Properties Ltd (TRUP) for £1 in April 2018. On 17 September 2018, Bollinway purchased 27 properties from TRUP paying in excess of £350 million plus VAT, having registered for VAT and notified an option to tax. They submitted a first VAT return for the period ending 10/18 in which repayment of the VAT incurred was claimed as input tax, but asked HMRC to set-off the amount of its credit corresponding to the output tax that would otherwise become payable by TRUP.
On 21 December 2018, that amount was allocated to TRUP’s VAT account and the remainder authorised for repayment to Bollinway. Bollinway claimed a repayment supplement was due under what was then VATA 1994, s. 79 as the payment had not been made, by HMRC, within the required 30 days. HMRC mistakenly paid a repayment supplement in relation to the balance paid to Bollinway but disputed any repayment supplement was due on the substantive amount set-off and claimed that s. 79 did not apply as Bollinway had assigned its right to the credit to TRUP. Alternatively, they had satisfied the requirement for their inquiries to be conducted within the relevant period.
Bollinway contended that s. 79 did still apply and the time taken, by HMRC, to agree the set-off exceeded the relevant period so that repayment supplement was due.
The FTT had concluded that, having assigned its right to a VAT credit, Bollinway was no longer entitled to rely on s. 79. But, in any case, HMRC had issued the requisite direction within the relevant period of 30 days leaving out a period of 26 days referable to the raising and answering of a reasonable inquiry relating to the claim.
Although Bollinway appealed on three separate grounds, it was agreed they had to succeed on the third of these – that the FTT had erred in concluding that a period of 26 days should be left out of account in computing the 30 day relevant period – to succeed in the appeal. The UT therefore considered whether or not that was the case.
Section 79 provided for a repayment supplement where a person was entitled to a credit, the relevant return had been received on time, the amount shown on the return did not exceed the payment due by more than 5% (or £250, whichever was the greater), but the written instruction directing the making of the payment was not issued within the relevant period of 30 days.
SI 1995/2518, reg. 198 (now omitted) had provided that, when computing the period of 30 days, periods referable to the raising and answering of any reasonable inquiry relating to the claim or return should be left out of account.
It was common ground Bollinway’s return was received on 2 November 2018 and the instruction for crediting TRUP’s VAT account was issued 49 days later on 20 December 2018. Bollinway accepted 4 days of reasonable enquiries should be left out of account. In particular, an inquiry raised by HMRC on 23 November, to which they responded on 26 November 2018 should be left out. HMRC had confirmed they would review the return for Bollinway Ltd and had requested a schedule of sales and purchase invoices, and a full set of backing documents. Bollinway believed this had been answered on 26 November when copies of the single sales invoice, and the transaction documents consisting of an option agreement, and an exercise notice had been provided. The FTT, however, had not considered sufficient information had been provided to give a complete answer. The properties were not transferred by the transaction documents but by the Land Registry form TR1s which were not provided until 18 December 2018. The FTT had therefore concluded 26 days should be excluded from the 49 days with the result that HMRC had completed the written instruction directing the making of the payment within the relevant period of 30 days.
Bollinway claimed there was no request for the TR1s on 23 November or, alternatively, the request was made unreasonably and it was therefore wholly artificial to hold Bollinway responsible for the delay between 27 November and 18 December 2018.
The UT accepted there was no express request for the TR1s but concluded the request for ‘a full set of backing documents’ must be considered in context and was required to establish whether a supply of goods or services had been made. Such a request would encompass the transfer documents themselves since it was incumbent on HMRC to carry out full inquiries before approving the repayment claim. They were entitled, therefore, to ascertain if the relevant transfers of the properties had in fact taken place. The TR1s were relevant because they were capable of assisting in the determination of when the VAT liability had arisen, including whether the actual tax point arose before the basic tax point as well as whether the transactions had actually been carried out. They were the definitive evidence that the supplies described by Bollinway had actually occurred.
Determining whether a period should be left out of account required a fact sensitive analysis of the raising and answering of any reasonable inquiry. The FTT had correctly set out the relevant provisions, and the law relating to repayment supplements. An appeal court should not interfere with conclusions on primary facts unless they were plainly wrong. In this case, the FTT was entitled to conclude that the request made by HMRC was for the TR1s, that such a request was reasonable, and the period from 23 November to 18 December when the Commissioners were satisfied they had received a complete answer to the inquiry should be excluded from the total of 49 days. Having failed to persuade the UT on this third ground there was no need to consider whether the FTT had erred in law in holding that Bollinway had assigned its entitlement to a credit to TRUP, or in holding that s. 79 only applied where an actual payment was made to a taxpayer and that the set-off was something other than an actual payment. The appeal was dismissed.
The UT, in this case, confirmed that a specific inquiry had to be made by HMRC to ‘stop the clock’ on the relevant period, under VATA 1994, s. 79. The request for a full set of backing documents was, however, interpreted as necessarily including the TR1s that evidenced the actual supply had taken place, despite the fact they had not been expressly requested, and therefore it was not until they had been provided by the taxpayer that the 30 day period resumed.
Comment by Angela Bedi, Senior Tax Writer, Croner-i Ltd
Michael Ripley, counsel, instructed by Nigel Gibbon & Co, appeared for the appellant
Peter Mantle, counsel, instructed by the General Counsel and Solicitor to His Majesty's Revenue and Customs, appeared for the respondents
[1] In a decision released on 2 September 2021, the First-tier Tribunal (Tax Chamber) (“the FtT”) dismissed the appeal by Bollinway Properties Limited (“Bollinway”) against the decision of the respondents (“HMRC”) that a repayment supplement under section 79 of the VAT Act 1994 (“VATA”) in respect of £71,084,816.43 claimed by Bollinway in its VAT return for the period 10/18 submitted on 2 November 2018, is not payable.
[2] Bollinway is a property business which forms part of a corporate group owned by Acepark Limited (“Acepark”). On 10 April 2018, Acepark acquired Toys “R” Us Properties Limited (“TRUP”) for £1 with a view to maximising the value of its property portfolio. On 17th September 2018, TRUP sold 27 properties to Bollinway.
[3] The background to the claim to a repayment supplement made by Bollinway is uncontroversial and was summarised in paragraphs [2] to [4] of the decision of the FtT:
[2] Bollinway submitted a VAT return for period 10/18 in which a repayment of £71,170,729.68 was claimed. That amount represented the input tax incurred on the purchase of a property portfolio (“the Properties”) from Toys “R” Us Properties Limited (“TRUP”) on 17th September 2018 for the sum of £355,853,648.39 plus VAT. Bollinway asked the Respondent (“HMRC”) to setoff the amount of its credit which corresponded to the amount of output tax TRUP would become liable to pay to HMRC.
[3] The sum of £71,084,816.43 was allocated by HMRC to TRUP's VAT account on 21st December 2018 and the remaining amount of £85,913.25 was authorised for repayment to Bollinway on 21st December 2018.
[4] Bollinway claims repayment supplement of £3,554,240.82 being 5% of the sum of the £71,084,816.43 which was credited against TRUP's liability for the same amount.
[5] In essence, HMRC says that Section 79 is not applicable to the amount set against TRUP's VAT liability, but even if it was so applicable, no repayment supplement was due because HMRC satisfied the rules requiring their inquiries to be conducted within a “relevant period”. Bollinway says that section 79 applies to the application of the £71,084,816.43 against TRUP's liability and the time taken to agree the set-off exceeded the relevant period so that repayment supplement is due.
[4] The FtT concluded, at paragraph [162] of its decision:
- Bollinway assigned its right to a VAT credit of...
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