In Rolldeen Estates Limited v HMRC [2023] TC08783, the First Tier Tribunal (FTT) found that a company which claimed its Option To Tax (OTT) on a property was invalid had no right of appeal against HMRC’s decision to treat the OTT as validly exercised.

  • In February 2008, Rolldeen Estates Ltd (Rolldeen) sent copies of Form VAT1614A to HMRC, Opting To Tax (OTT), for VAT, two recently purchased properties.
    • These forms included confirmation that Rolldeen had made no Exempt supplies in relation to either property. This confirmation was later repeated in writing to HMRC.
  • In March 2008, HMRC issued a letter acknowledging that the properties had been opted to tax from 10 January 2008.
    • Thereafter, Rolldeen Reclaimed VAT on repairs and other related property costs and charged VAT to its tenants.
  • During 2015 and 2017, both opted properties were sold, but Rolldeen failed to account for VAT on the sales.
  • In August 2017, HMRC issued Rolldeen with VAT assessments. These were not appealed by Rolldeen.
  • In November 2018, Rolldeen provided HMRC with leases, dated before 10 January 2008, relating to one of the properties.
    • These leases demonstrated that exempt supplies of the property had in fact been made before the date of the OTT.
    • The existence of these exempt supplies meant that HMRC’s permission was required in order for the OTT to be valid.
    • No permission to opt had been given by HMRC. It followed that no output VAT was due on the sale of the property as there was no valid OTT in place.
  • In March 2019, HMRC issued a decision stating that they were exercising their discretion under Sch 10, Para 30, VATA 1994 to treat the land as validly opted with effect from 10 January 2008.
    • This is a rarely used provision which allows HMRC to retrospectively dispense with the requirement for prior permission to opt to tax and to treat a ‘purported option as if it had instead been validly exercised’.
  • Rolldeen Appealed to the First Tier Tribunal (FTT).

The FTT found that:

  • The OTT legislation was rewritten with effect from 1 June 2008. These rewritten provisions introduced HMRC’s powers in Para 30.
    • Para 30 could be used to retrospectively validate the OTT in relation to supplies made after 1 June 2008 (i.e. including the sale of the property) notwithstanding that the purported OTT had an effective date before Para 30 was introduced.
  • Rolldeen had no right of appeal against HMRC’s use of Para 30.
    • Section 83(1)(wb) VATA 1994 gives a right of appeal against “any refusal of the Commissioners to grant any permission under, or otherwise to exercise in favour of a particular person any power conferred by, any provision of Part 1 of Schedule 10”.
    • HMRC did not refuse to exercise a power in Rolldeen’s favour. It had used its Para 30 powers to Rolldeen’s detriment. No appeal could therefore be made under s.83(1)(wb).
    • For this reason, Rolldeen’s appeal was struck out.

Both HMRC and Rolldeen considered that there was in fact a right of appeal. For completeness, the FTT considered the position if its decision on the lack of a right of appeal was incorrect:

  • HMRC had known that exempt supplies had already been made in relation to the property, owing to a compliance visit in January 2008.
    • Rolldeen was estopped from relying on this fact because both parties had shared a common assumption that the OTT was valid.
    • The other tests relating to estoppel by convention, set out in Tinkler v HMRC [2021] UKSC 39, were met.
  • It was the taxpayer’s obligation to complete forms correctly.
    • Rolldeen had twice provided HMRC with incorrect information that no exempt supplies had been made.
    • HMRC could not be blamed for not having carried out a compliance check.
  • Para 30 was designed for precisely these circumstances.
    • Both parties had proceeded on the basis that the OTT was valid and HMRC invoking Para 30 made it so.
  • HMRC acted entirely reasonably in issuing the OTT decision.

Useful guides on this topic

Opting to tax land and property
What is an option to tax? What do I need to do to opt to tax? What happens if I buy an opted property?

Land & Property VAT (Subscriber guide)
An outline of the VAT treatment of some of the more common supplies of land and property.

Land & Property: Non-residential
This guide considers the VAT treatment of the supply of non-residential property.

Land & Property VAT at a glance
A summary of VAT on common land and property transactions.

How to appeal an HMRC decision
Disagree with an HMRC decision? How to appeal, what type of decision can you appeal and what are your different options when you disagree with HMRC? What are the key steps in making an appeal?

External link

Rolldeen Estates Limited v HMRC [2023] TC08783

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