Jurisdiction(s):
United Kingdom

UK VAT property sales: tax points from deposits, stakeholder v agent, novation and TOGC — Clark Hill Ltd v HMRC [2018] UKFTT 111 (TC)

Published on: 15 March 2018

Published by a LexisNexis Tax expert

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Clark Hill Ltd v HMRC [2018] UKFTT 111 (TC) What are the practical implications of this case?

The ruling features noteworthy judicial comments, expressed obiter, addressing the complex question of how VAT applies where a contract is novated. The dispute centred on the VAT time of supply (the tax point) for a property disposal in which the initial purchaser had paid a deposit, yet the agreement was later novated, with completion occurring between the original vendor and a different purchaser. In a scenario without novation, the operation of the time of supply provisions in section 6 of the Value Added Tax Act 1994 (VATA 1994) is that a deposit paid to the seller or the seller’s agent establishes a tax point. That approach is troublesome when novation intervenes, because the deposit is made under one contract while completion proceeds under another. The interaction between a deposit taken under the first arrangement and completion under the successor contract clouds the question of when VAT falls to be accounted for. For a property transfer to be treated as a TOGC for VAT, certain prerequisites must be fulfilled before the tax point. Thus, identifying the tax point is critical. In these circumstances...

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