Marlow Gardner & Cooke Ltd (Directors' Pension Scheme) v Revenue & Customs

An election to waive VAT exemption on land and buildings is distinct from notification of that election. The election requires a sufficiently clear, objectively manifested indication of intention; no particular formality is required. Notification may be made after the election, subject to the statutory time limit or an extension allowed by the Commissioners.

Once valid notification is made, the election takes effect retrospectively from the date specified by the legislation. That remains so even where the relevant supply has already disposed of the taxpayer’s interest in the land. The statutory mechanism does not infringe legal certainty merely because the purchaser’s VAT position depends on a later notification.

The appellant appealed from a VAT Tribunal determination concerning the sale of commercial property by Net Support Limited. Net Support had charged VAT on rent and recovered input tax, but had not notified HM Customs and Excise of an election to waive the VAT exemption until after selling the property.

The Tribunal found that Net Support had made an election and that the Commissioners had validly accepted late notification. The appeal challenged both findings. The central issues were whether the evidence established an election and whether notification after disposal of the property could retrospectively make the sale taxable.

1. Election. Under Value Added Tax Act 1994, Schedule 10, paragraph 2, an election requires no prescribed formality. It requires a sufficiently clear indication of intention, objectively manifested or communicated where necessary. The Tribunal was entitled to infer an election from the decision to charge VAT on rent, accounting for that output tax and claiming input tax. The contrary conveyancing correspondence did not make the finding legally impermissible.
2. Fencing Supplies. The court was not prepared to hold that Fencing Supplies Limited [1993] VATTR 302 was wrongly decided. Its approach, that objectively perceived acts may establish an election, was unobjectionable. The present facts also contained additional evidence supporting the election.
3. Notification and retrospectivity. Schedule 10, paragraph 3 establishes a two-stage process. An election is made first, and notification follows. Reading paragraphs 2(1), 3(1) and 3(6) together, valid notification completes the election’s effect retrospectively from the date of election. The legislation does not distinguish between supplies which leave the taxpayer owning the land and supplies which dispose of the taxpayer’s entire interest.
4. European law and certainty. The observations in Optigen Ltd v Customs and Excise Commissioners [2006] STC 419 concerned a different statutory and factual context. The principles concerning certainty in Luxembourg v VOK [2005] STC 1345 and Customs & Excise v Mirror Group & Cantor Fitzgerald International [2001] STC 1453 did not prevent the statutory retrospective effect. The taxpayer and the authorities could ascertain the consequences of the relevant choices. Section 19(2) also governed the value of a supply where the consideration did not expressly include VAT.
5. Article 13C. The term taxpayer in Article 13C of the Sixth Directive did not confine the right of option to a person who remained the landowner at the date of notification. Net Support remained appropriately described as a taxpayer and taxable person before, at and after the disposal. The Tribunal’s decision was therefore upheld and the appeal dismissed.

• High Court (Chancery Division): The appeal from the VAT Tribunal determination dated 4 November 2005 was dismissed.