Appeal before the Upper Tribunal – Moulsdale v HMRC

Appeal before the Upper Tribunal – Moulsdale v HMRC

Moulsdale v. HMRC [2021] CSIH 29

Philip Simpson, Q.C., appeared for the taxpayer in the recent case of Moulsdale v. HMRC. This was an appeal from the Upper Tribunal. The case concerned the so-called anti-avoidance provisions in Schedule 10 to the Value Added Tax Act 1994. These concern the option that can be exercised by the owner of land or buildings to have a supply of that land or buildings treated as a taxable transaction instead of exempt. The specific issue is that for the option to tax to be switched off, one of the conditions relevant in the present case was whether the grantor ‘intended or expected’ that the building would become a ‘capital item’ (within the meaning of the VAT Regulations 1995) in relation to the purchaser. But this would happen only if the supply was taxable. So if the supply was going to be taxable, the option to tax would be switched off: no VAT would arise on the supply. But then it would not be intended or expected that the building would be a capital item for the purchaser. The option to tax would remain switched on. The supply would be taxable. And the option to tax would be switched off. And so on. The majority of the Inner House held that First-tier Tribunal’s findings of fact meant that the appeal should be refused. But Lord Doherty, in the minority, held that the FTT had made an error of law in its interpretation of the legislative provisions, and that that error undermined the relevant findings-in-fact. In any event, the appeal was refused.

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