ICAS ICAS logo

Quicklinks

  1. About Us

    Find out about who we are and what we do here at ICAS.

  2. Find a CA

    Search our directory of individual CAs and Member organisations by name, location and professional criteria.

  3. CA Magazine

    View the latest issues of the dedicated magazine for ICAS Chartered Accountants.

  4. Contact Us

    Get in touch with ICAS by phone, email or post, with dedicated contacts for Members, Students and firms.

Login
  • Annual renewal
  • About us
  • Contact us
  • Find a CA
  1. About us
    1. Governance
  2. Members
    1. Become a member
    2. Newly qualified
    3. Manage my membership
    4. Benefits of membership
    5. Careers support
    6. Mentoring
    7. CA Wellbeing
    8. More for Members
    9. Area networks
    10. International communities
    11. Get involved
    12. Top Young CAs
    13. Career breaks
    14. ICAS podcast
    15. Newly admitted members 2022
    16. Newly admitted members 2023
  3. CA Students
    1. Student information
    2. Student resources
    3. Learning requirements
    4. Learning updates
    5. Learning blog
    6. Totum Pro | Student discount card
    7. CA Student wellbeing
  4. Become a CA
    1. How to become a CA
    2. Routes to becoming a CA
    3. CA Stories
    4. Find a training agreement
    5. Why become a CA
    6. Qualification information
    7. University exemptions
  5. Employers
    1. Become an Authorised Training Office
    2. Resources for Authorised Training Offices
    3. Professional entry
    4. Apprenticeships
  6. Find a CA
  7. ICAS events
    1. CA Summit
  8. CA magazine
  9. Insight
    1. Finance + Trust
    2. Finance + Technology
    3. Finance + EDI
    4. Finance + Mental Fitness
    5. Finance + Leadership
    6. Finance + Sustainability
  10. Professional resources
    1. Anti-money laundering
    2. Audit and assurance
    3. Brexit
    4. Business and governance
    5. Charities
    6. Coronavirus
    7. Corporate and financial reporting
    8. Cyber security
    9. Ethics
    10. Insolvency
    11. ICAS Research
    12. Pensions
    13. Practice
    14. Public sector
    15. Sustainability
    16. Tax
  11. CPD - professional development
    1. CPD courses and qualifications
    2. CPD news and updates
    3. CPD support and advice
  12. Regulation
    1. Complaints and sanctions
    2. Regulatory authorisations
    3. Guidance and help sheets
    4. Regulatory monitoring
  13. CA jobs
    1. CA jobs partner: Rutherford Cross
    2. Resources for your job search
    3. Advertise with CA jobs
    4. Hays | A Trusted ICAS CA Jobs Partner
    5. Azets | What's your ambition?
  14. Work at ICAS
    1. Business centres
    2. Meet our team
    3. Benefits
    4. Vacancies
    5. Imagine your career at ICAS
  15. Contact us
    1. Technical and regulation queries
    2. ICAS logo request

The FTT rejected HMRC’s attempt to change their position on the grant of an option to acquire land and the release for consideration of such an option.

  • LinkedIn (opens new window)
  • Twitter (opens new window)
By Jan Garioch CA

30 June 2020

Key points:

  • HMRC wanted to move from their published practice and start to treat the grant of an option to acquire land as a taxable supply.
  • Even if that aim was rejected, HMRC also wanted to argue that the release of an option was not a mirror image of the original grant.
  • With £237,500 at stake, the FTT heard an appeal against this new HMRC thinking.

Jan Garioch CA discusses a recent case, Landlinx Estates Ltd v HMRC, which saw HMRC try to move away from a position which had applied since 1972.

The point at issue

Landlinx Estates Ltd v HMRC (Landlinx) v HMRC tackles the question of whether the release for a consideration of a call option to purchase land is a taxable supply of services or an exempt supply of an interest in land. HMRC came to the FTT to argue for a position which differed from their published practice. For many years HMRC had treated the grant of an option to acquire land as an exempt supply, and that was reflected in Notice 742.The FTT were advised that HMRC had rethought its position. HMRC now held the view that the grant of an option to acquire land was a standard rated supply and its release for a consideration would equally be standard rated. In a ‘belt and braces’ approach, HMRC argued that even if their new position on the grant of an option to buy was not accepted, the release, for a consideration, of that option was not the mirror image of the original grant. Therefore, even if the original grant of the option is held to be exempt, the release of it is standard rated.

The facts of the case were that Landlinx had received £1,425,000 for the release of an option to buy land and consequently was assessed for £237,500 of underdeclared output VAT. Encouraged by HMRC’s published practice, Landlinx had no reason to require the contractual documentation to state that consideration paid to it should be VAT exclusive. With so much at stake, and with

HMRC’s internal review upholding the assessment, Landlinx challenged the assessment.

Arguments from the parties

When the parties laid their cards on the table in front of the FTT, HMRC contended that the call option did not confer on Landlinx the right to dispose of tangible property as owner. By surrendering its rights under the Option Agreement, Landlinx was not surrendering or transferring ownership of the underlying property.

Landlinx countered that as a matter of English law, a call option prevents the grantor of the option from selling the property unencumbered to a third party. HMRC had failed to put forward any credible argument to the effect that, if the granting of an option to purchase land created an interest in land, the surrender of such an option was not also the transfer of an interest in land. Where a transaction fell within the scope of an exemption provided for by European law, an alteration in the relationship such as a termination or release for consideration must be regarded as falling within the scope of the same exemption.

FTT’s decision

The FTT felt the real question in this appeal is whether the rights which were created by the option and which were released by Landlinx to the grantor fell within the exemption afforded by Article 135(1)(j). (Since this case involved an important point of EU law, the FTT was mindful of whether either party wished them to refer the issue to the ECJ. Since neither party did, and since the costs involved in a reference would be disproportionate to the sums involved, they decide against referral.)

They looked at the rationale for exempting immovable property and found an explanation in Lubbock Fine from the Advocate General who explained that immovable property raises a number of specific problems for VAT purposes (such as e.g. double taxation). A building is excluded from the tax as it has already been consumed by virtue of its first occupation. The FTT felt that rationale applies as much to a supply of a lesser or derivative interest in land and buildings as it does to the transfer of the whole interest in land and buildings.

In other words, in order for a transaction to fall within Article 135(1)(j) it was not necessary for it to be a supply of goods. It appeared to the FTT that in 1972 the UK had decided to exempt all transactions dealing with interests in land (subject to certain specified exceptions) and once the relevant provisions of the Sixth Directive came into force, the UK simply allowed its existing exemptions to continue in force. Since the EU has made no challenge to this the FTT found it indicative of it being compliant with EU law, especially in light of the fact that the EU speedily attacked the UK on being over generous regarding zero rating.

Their judgement was therefore to allow the appeal against the assessment

HMRC update on VAT payment deferral in the light of COVID-19

8 April 2020

COVID-19 – VAT deferment and requirement for full digital links delayed

By Charlotte Barbour, Director of Taxation and Susan Cattell, Head of Tax Technical Policy

31 March 2020

2-23-marsh 2-23-marsh
ICAS logo

Footer links

  • Contact us
  • Terms and conditions
  • Modern slavery statement
  • Privacy notice
  • CA magazine

Connect with ICAS

  • Facebook (opens new window) Facebook Icon
  • Twitter (opens new window) Twitter Icon
  • LinkedIn (opens new window) LinkedIn Icon
  • Instagram (opens new window) Instagram Icon

ICAS is a member of the following bodies

  • Consultative Committee of Accountancy Bodies (opens new window) Consultative Committee of Accountancy Bodies logo
  • Chartered Accountants Worldwide (opens new window) Chartered Accountants Worldwide logo
  • Global Accounting Alliance (opens new window) Global Accounting Alliance
  • International Federation of Accountants (opens new window) IFAC
  • Access Accountancy (opens new window) Access Acountancy

Charities

  • ICAS Foundation (opens new window) ICAS Foundation
  • SCABA (opens new window) scaba

Accreditations

  • ISO 9001 - RGB (opens new window)
© ICAS 2022

The mark and designation “CA” is a registered trade mark of The Institute of Chartered Accountants of Scotland (ICAS), and is available for use in the UK and EU only to members of ICAS. If you are not a member of ICAS, you should not use the “CA” mark and designation in the UK or EU in relation to accountancy, tax or insolvency services. The mark and designation “Chartered Accountant” is a registered trade mark of ICAS, the Institute of Chartered Accountants of England and Wales and Chartered Accountants Ireland. If you are not a member of one of these organisations, you should not use the “Chartered Accountant” mark and designation in the UK or EU in relation to these services. Further restrictions on the use of these marks also apply where you are a member.

ICAS logo

Our cookie policy

ICAS.com uses cookies which are essential for our website to work. We would also like to use analytical cookies to help us improve our website and your user experience. Any data collected is anonymised. Please have a look at the further information in our cookie policy and confirm if you are happy for us to use analytical cookies: