Neville Russell (A Firm)
| Jurisdiction | UK Non-devolved |
| Judgment Date | 08 September 1987 |
| Date | 08 September 1987 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
The following cases were referred to in the decision:
Gleneagles Hotel plc (1986) VATTR 196
National Coal Board v. C. & E. Commrs. VAT(1982) 1 BVC 515
Supply - Whether supply of services for consideration -Value Added Tax Act 1983 section 3 subsec-or-para (2)Value Added Tax Act 1983, sec. 3(2).
The appellant was a firm of chartered accountants occupying offices at 246 and 266 Bishopsgate in the City of London. It appealed against an assessment for £122,608, being tax on £940,000 which the Commissioners alleged was consideration for a taxable supply. This amount had been received by the taxpayer in connection with the renewal of the lease on its existing premises at 246 Bishopsgate and the creation of a lease on the adjoining premises at 266 Bishopsgate which they required in order to expand their office area. The amount of £940,000 was made up of three elements:
£240,000 constituted a reduction in the rent payable on the new premises to take into account the fact that two floors were not required for occupation by the business and that it would take a year to find a tenant to occupy the property;
£400,000 was an amount paid by the new freeholders, the Norwich Union, to enable the taxpayer to refurbish the new premises; and
£300,000 was paid by the freeholder to the appellant in connection with the acceptance of a lease on 266 Bishopsgate.
For the appellant it was contended that in respect of none of these sums paid had any services been supplied by the firm.
For the Commissioners it was contended that a supply of services for tax purposes was made in undertaking to enter into the two leases of the premises in question for a consideration of £940,000 to be paid and allocated in such a manner as the parties might agree. Alternatively, three separate supplies of services had been made to the Norwich Union consisting of (1) the works of refurbishment to 266 Bishopsgate for a consideration of £400,000; (2) their acceptance of a demise of the unwanted top two floors of that building for a year for consideration of £240,000 paid by way of set-off against the rent of £440,000; and (3) the entering into the two new leases for a consideration of £300,000.
Held, allowing the taxpayers' appeal in part, so far as the amount of £240,000 was concerned, this amount representing the reduction in the rent otherwise payable for 266 Bishopsgate to take into account the fact that the top two floors were to be sublet, this did not amount to a supply of services made for a consideration but was merely a reduction in the amount of rent payable. Of the remaining amount of £700,000 paid to the taxpayer the question for determination was whether the amount represented consideration for a supply of services, defined by sec. 3(2) of the Act as being anything not being a supply of goods but done for a consideration. For tax purposes the payment of £400,000 for the undertaking by the taxpayer of works of refurbishment to 266 Bishopsgate amounted to a supply of services chargeable to tax at the standard rate and the £300,000, being an amount paid for the execution of the new lease of 266 Bishopsgate amounted to something done, and consequently for tax purposes was a supply of services. Accordingly, the assessment was reduced to an amount representing tax at the standard rate on £700,000.
[The Tribunal set out the facts summarised above and continued as follows.]
… Mr. Philip Lawton Q.C. instructed by Messrs. Watson Farley & Williams, Solicitors, appears for Neville Russell. His submissions can be summarised shortly as follows:
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(2) there are three separate situations to be considered, that is to say, the reduced rent payable...
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