SEH Holdings Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 04 August 2000 |
| Date | 04 August 2000 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
The following cases were referred to in the decision:
University of Bath VATNo. 14,235; [1996] BVC 2909
Watters VATNo. 13,337; [1996] BVC 2361
Exemption - Land and buildings - Election to waive exemption - Sale of former public house for use as dwelling - Vendor had opted to tax - appellant purchaser sold property on to third party for use as dwelling on same day as purchase - Whether supply to appellant exempt - Whether intended use had to be that of purchaser to secure exemption - Whether vendor aware of intention - Value Added Tax Act 1994 section 31 section 51 schedule 10 subsec-or-para 2Value Added Tax Act 1994, ss. 31 and 51 and Sch. 10, para. 2(2)(a).
The issue was whether the sale of a building by a vendor who had opted to tax in relation to it and which was intended for use as a dwelling was exempt, where the purchaser immediately upon purchasing the building sold it on to a third party.
On 23 December 1997 F, a member of the group of which the appellant was the representative member, entered into a contract for the purchase of a former public house "together with value added tax payable thereon". The vendor had elected to waive exemption on the property and VAT was charged on the sale. On the same day, F sold the property to T, and the yard and outbuildings to G, the contracts for sale being conditional upon F carrying out the conversion of the property into two residential blocks for which listed building consent had been granted. F claimed the input tax in respect of the tax charged on the sale to it and the claim was disallowed by Customs on the basis that the supply to T and G were exempt. That decision was not disputed. By letter dated 16 October 1998, Customs ruled that the supply made to F was a taxable supply. The appellant disputed the decision on the basis that the supply was exempt.
The appellant contended that if the option to tax made by the vendor was disapplied because the grant had been made "in relation to a building or part of a building intended for use as a dwelling or number of dwellings". It argued that Value Added Tax Act 1994, Value Added Tax Act 1994 schedule 10 subsec-or-para 2Sch. 10, para. 2(2)(a) referred to the intended use of the property and not by the purchaser and since T and G intended it for use as a number of dwellings that was sufficient for the vendor's option to be disapplied. The overall intention of the legislation was to exempt the supply of dwellings and the fact that Value Added Tax Act 1994 schedule 10 subsec-or-para 2para. 2(2B)(b) specifically referred to the intention of the recipient of the supply implied that the absence of any such reference in para. 2(2)(a) meant that the recipient's intention was not the key factor. Assuming that the appellant's submission on the primary issue was accepted, what was necessary was that a vendor had to be aware of the intended use at the time of sale and in the instant case he was.
The commissioners contended that the condition "intended for use" was only satisfied where the purchaser intended to use the building as a dwelling, which was not the case here, since F's intention had been to sell the property on to T and G as part of its trading activities. However, they accepted that for Value Added Tax Act 1994 schedule 10 subsec-or-para 2para. 2(2)(a) to apply, the purchaser did not have to intend to occupy the building himself and that it was sufficient if he intended to convert it into a dwelling and then sell it to third party who would occupy it. However, in this case that was not the position.
Held, dismissing the company's appeal:
1. The legislation was phrased in such a way that the provision only applied "in relation to a grant if the grant is made in relation to" a building intended for use as a dwelling. The grant was therefore also of importance.
2. VAT was a tax on each transaction and it was a general tax on consumption, so that exemptions had to be narrowly construed. It followed that the rate applicable to the transaction had to be known to the supplier at the time of the transaction. Unlike most transactions, in which objective criteria applied, in this case the rate depended on the intention of a person other than the supplier. The supplier therefore had to be certain as to the intended use of the building, but if the taxable status of the supply depended on the intention of a person other than the purchaser there could be a lack of certainty. Consequently, the intended use had to be use by the purchaser.
3. The tribunal was not persuaded by the appellant's argument that the absence of a specific provision in Value Added Tax Act 1994 schedule 10 subsec-or-para 2para. 2(2)(a)meant that its effect was meant to be of a wider application.
4. Although it was unnecessary to decide the issue of whether the vendor had to be aware of the intention at the time of the sale, the tribunal expressed a view that it did, but that in this case the appellant had not satisfied the tribunal that the vendor was indeed aware of that intention.
[The tribunal set out the facts summarised above and continued as follows.]
7. The appellant argued that the vendor should not have charged value added tax on the sale of the public house to [SEH French Ltd ("French")] because the sale related to "a building intended for use as a number of dwellings" within the meaning of Value Added Tax Act 1994 schedule 10 subsec-or-para 2para. 2(2)(a) of Sch. 10 [to the Value Added Tax Act 1994] and that para. 2(2)(a) did not state that the intention for use as dwellings had to be that of the purchaser. The appellant accepted that the intention to use the building as a dwelling had to be known to the vendor at the time of the sale and argued that it was so known. Customs argued that the sale of the building by the vendor was to French who did not intend it for use as a number of dwellings but to sell it to the two ultimate purchasers. Further, the vendor had not known of the intention to use the building as...
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