Fengate Developments (A Partnership) v Customs & Excise

For VAT purposes, whether a transfer of land is a supply by a partnership is determined from the whole factual and legal context, not from the transfer form in isolation. A tribunal’s primary findings of fact are not open to appellate challenge absent an error of law, including an error in construing a material document. Land vested in partners for partnership purposes may be transferred as a partnership asset through them. Paragraph 8 of Schedule 10 to the VATA 1994 applies only where the person making the grant and the person receiving the benefit of the consideration are different. It does not apply where the partnership made the transfer and received the consideration through its partners.

Fengate, a VAT-registered property-development partnership, held land through its partners. The partners executed a TR1 transferring the registered title to one partner and his former wife, while £250,000 was paid into Fengate’s account. Fengate maintained that only the former wife’s beneficial half share had been transferred and that the payments were capital injections, not consideration for a partnership supply.

The VAT and Duties Tribunal found that Fengate had supplied the whole land and dismissed the appeal. The High Court dismissed a further appeal on 6 February 2004, in a judgment reported at [2004] STC 772. The central issue was whether the tribunal had erred in law in construing the TR1 and applying the VAT provisions governing the person receiving consideration.

Appeal dismissed. Lord Justice Mummery gave the judgment. Lord Justice Maurice Kay and Lord Justice Gage agreed.

1. The VAT and Duties Tribunal’s function was to hear the evidence and determine from the whole facts whether Fengate had supplied an interest in land for VAT purposes. There was no appeal against primary findings of fact where the tribunal had properly directed itself in law. An error of law in construing a material legal document could justify appellate intervention. The approach was consistent with Customs & Excise Commissioners v Reed Personnel Services Ltd [1995] STC 588 at 595d.
2. The TR1 had to be construed as a whole and in its factual and legal environment. Its meaning did not depend solely on the language of the form or on the parties’ understanding of its legal effect. The tribunal was entitled to consider the acquisition and holding of the land as a partnership asset, the true consideration, the destination of the payments, and the partnership accounts.
3. Those findings supported the conclusion that the whole land had been transferred as a Fengate partnership asset and that Fengate had received the full £250,000 consideration through the partners. The additional provision in Box 12 did not alter that conclusion because the suggested separate transactions were inconsistent with the primary facts.
4. Paragraph 8 of Schedule 10 to the VATA 1994 was limited to cases where the person making the grant and the person receiving the benefit of the consideration were different. There was no such mismatch. Even if Mrs Darlow alone had transferred a beneficial half share, paragraph 8 would not apply because she had received the consideration as her separate property before injecting it into the partnership.
5. Box 11, concerning the manner in which multiple transferees held the property, was irrelevant to identifying the supplier or the nature of the supply. Any error by the High Court judge concerning Box 11 did not justify interference, since the tribunal’s findings independently supported its decision. The appeal was dismissed, costs were ordered against Fengate, and permission to appeal to the House of Lords was refused.

1. Court of Appeal (Civil Division): On 1 December 2004, dismissed Fengate’s second appeal, refused permission to appeal to the House of Lords, and ordered costs.
2. High Court, Chancery Division: Evans-Lombe J dismissed Fengate’s appeal from the VAT and Duties Tribunal on 6 February 2004; the judgment was reported at [2004] STC 772.
3. VAT and Duties Tribunal: On 9 September 2003, dismissed Fengate’s appeal against the VAT assessment.