The option to tax
SCHEDULE 10 BUILDINGS AND LAND
2.(1)This paragraph applies if—
(a)a person exercises the option to tax any land under this Part of this Schedule, and
(b)a grant is made in relation to the land at any time when the option to tax it has effect.
(2)If the grant is made—
(a)by the person exercising that option, or
(b)by a relevant associate (if that person is a body corporate),
the grant does not fall within Group 1 of Schedule 9 (exemptions for land).
(3) For the meaning of “relevant associate”, see paragraph 3.
“tax” means VAT;
Defined in s.96(1) · see it in the full Act3. (1) This paragraph explains for the purposes of this Part of this Schedule what is meant by a “relevant associate” in a case where a person (“the opter”) exercises an option to tax in relation to any building or land.
Defined in Sch.10 para.3(1) · see it in the full ActThe paragraph gives effect to an election that removes an otherwise exempt land grant from Group 1 of Schedule 9, subject to the statutory anti-avoidance qualification. (See Lord Hoffmann’s speech, unnumbered.) The college’s election under this provision was capable of making its lease a taxable supply, unless the exempt-land disqualification applied. (See Lord Hoffmann’s and Lord Hope’s speeches, unnumbered.) An election does not make the grant taxable where the developer-grantor intended or expected the land to become or remain exempt land. Because the college was not in occupation, that disqualification was not established. (See Lord Hoffmann’s and Lord Hope’s speeches, unnumbered.)
A taxable person may elect to waive the exemption for a supply of land. The respondent exercised that option with effect from November 1995. (See Lord Hoffmann; Lord Walker, The Facts and the Proceedings Below.)
The provision confers the election to waive exemption so that qualifying grants of interests in land are taxable supplies. (see paras [5]; [23]) The provision is identified as part of the restrictions surrounding the election to waive exemption and its interaction with paragraph 2(3AA). (see para [23]) The former connected-person restriction is used in the legislative history to show that an earlier restriction would have covered the arrangements but was repealed. (see paras [25]; [58]) The provision prevents an election from making a supply taxable where a developer grants the interest and intends or expects the land to become or remain exempt land. Its application turns on statutory occupation, not an enlarged anti-avoidance concept. (see paras [6]–[8]; [28]–[30])
What each judgment says about Schedule 10, paragraph 2 is in the case-law panel in the full Act.