Case Law Analysis: Bollinway Properties Ltd v HMRC Explores VAT Repayment Supplement Eligibility

Citation: [2023] UKUT 295 (TCC)
Judgment on

Introduction

The case of Bollinway Properties Limited v The Commissioners for HM Revenue and Customs (HMRC) provides a comprehensive examination of VAT repayment supplements under Section 79 of the VAT Act 1994. It questions the boundaries of reasonable inquiry and the relevant period calculations for repayment supplements. This article dissects the key legal principles that the Upper Tribunal (Tax and Chancery Chamber) applied in determining the outcome of the appeal brought by Bollinway Properties Limited.

Key Facts

Bollinway Properties Limited, part of a corporate group owned by Acepark Limited, acquired a property portfolio from Toys “R” Us Properties Limited (TRUP) and subsequently submitted a VAT return claiming a significant repayment. The dispute arose over whether a repayment supplement, based on 5% of the sum claimed, was due from HMRC given the delay in the payment relative to the statutory timeframe stipulated under Section 79 VATA.

The timeline of interactions between Bollinway (through MHA Moore and Smalley) and HMRC centered on the provision of documents HMRC deemed necessary to substantiate the VAT credit claim amounting to over £71 million. The critical contention Focused on whether HMRC’s request for a “full set of backing documents” on 23 November 2018 reasonably included the transfer forms (TR1s) and whether the period taken to provide these documents should be discounted when calculating the 30-day relevant period for the repayment supplement.

The Upper Tribunal applied the following legal principles in its analysis:

  1. VAT Credit and Repayment Supplement Eligibility: Section 79 of the VAT Act 1994 identifies the conditions under which a repayment supplement is added to a VAT credit due to delayed payments or refunds by HMRC. A key condition includes the issuance of the written instruction for payment within a “relevant period” of 30 days after the VAT return is submitted (Section 79(2A)).

  2. Exclusion of Periods During Reasonable Inquiry: Regulation 198 and 199 of the VAT Regulations 1995 stipulate that the computation of the 30-day period excludes time spent in raising and answering reasonable inquiries. The crux of the case revolved around what constituted a reasonable inquiry under these regulations.

  3. Nature of Inquiry: L Rowland & Co (Retail) Ltd v Customs and Excise Commissioners established that a “reasonable inquiry” should relate specifically to the VAT return in question and should not amount to an undefined general investigation.

  4. Responsibility to Provide Information: It is the taxpayer’s responsibility to provide a complete and prompt answer once an inquiry is raised by HMRC, and the period for which the “clock is stopped” is determined by when a complete answer is provided (L Rowland & Co (Retail) Ltd).

  5. Actual Transfer vs. Tax Point: The Tribunal differentiated between the legal transfer of property as the ‘chargeable event’ and the tax point under VAT time of supply rules as laid out in Section 6 VATA.

Outcomes

The Upper Tribunal concluded that:

  • The inquiry by HMRC for a “full set of backing documents” was reasonable and included the TR1s, which substantiated the transaction that triggered the large VAT claim.
  • The period from 23 November to 18 December 2018 (26 days) should be excluded in calculating the 30-day relevant period for the repayment supplement, as this was time spent addressing the reasonable inquiry.
  • The Tribunal emphasized the necessity for taxpayers to provide HMRC with the most relevant documents, especially in the context of a sizeable financial transaction involving the transfer of land.

Consequently, Bollinway’s appeal was dismissed, as the VAT repayment claim instructions were issued within the ‘relevant period’, and thus Bollinway was not entitled to the repayment supplement.

Conclusion

The Bollinway Properties Limited case demonstrates the importance of responsiveness and thoroughness from taxpayers when dealing with HMRC’s inquiries into substantial VAT repayment claims. The precise nature of reasonable inquiries and the taxpayer’s duty to provide complete answers are examined within the statutory framework. Legal practices are reminded through this case that the interpretation of requests for documentation must be context-sensitive and that all periods of delay attributable to the taxpayer during an inquiry into a VAT return may legitimately be excluded in the computation of the relevant period for a repayment supplement under Section 79 VATA.