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Royal and Sun Alliance Insurance Group plc v Her Majesty’s Commissioners of Customs and Excise; HL 22 May 2003

References: Times 26-May-2003, [2003] UKHL 29, [2003] 1 WLR 1387, [2003] 23 EGCS 134, [2003] STI 1013, [2003] STC 832, [2003] 2 All ER 1073, [2003] BTC 5285, [2003] BVC 341
Links: House of Lords, Bailii
Coram: Lord Steyn, Lord Woolf, Lord Hoffmann, Lord Clyde, Lord Walker of Gestingthorpe
The landlord had elected to waive exemption to charging VAT on its lettings. The tenant relet the demised premises, but at first without charging VAT. It later charged VAT on the sublease, but the commissioners objected to the attempt of the claimants under regulation 109 to reclaim the VAT it had itself paid before that change.
Held: The grant of an interest in land was zero rated unless the Landlord elected to waive exemption. That exemption not having been chosen, the head landlord had charged VAT on its rents. Regulation 109 required an intention to use the inputs in order itself to make a supply of taxable sub-leases, and the change had to relate to specific goods or services. If the letting was seen as a single supply, then the change would be about the entire supply, and the tax payer would succeed. If the lease was a successive series of supplies, the change could only apply to the periods directly affected, and not any earlier period. The second way wa sthe apporach adopted by the regulations generally. The supply of an exempt service and of a non-exempt service should in any event be seen as separate supplies. (Woolf and Walker dissenting)
Statutes: Value Added Tax Regulations 1995 (SI 1995/2518) 109, Sixth Directive 17(1)
This case cites:

  • Appeal from – Commissioners of Customs & Excise v Royal and Sun Alliance Insurance Group Plc CA ([2001] EWCA Civ1476)
    The respondent sought to deduct input tax from income it received from lettings. It had previously occupied the buildings itself making exempt supplies, but then let them. They later waved their exemption, and sought to deduct input tax for periods . .
  • Cited – Svenska International Plc v Commissioners of Customs and Excise HL (Times 30-Mar-99, Gazette 03-Jun-99, Bailii, [1999] UKHL 23, [1999] 1 WLR 769, [1999] 2 All ER 906)
    When assessing the time of supply in a continuous supply of services, it did not take place until either payment was made or a tax invoice issued, and as between members of a group of companies, no opportunity arose to set its tax against input . .
  • Cited – Abbey National Plc v Commissioners of Customs and Excise ECJ (Times 13-Mar-01, [2001] STC 297, C-408/98, [2001] 1 WLR 769, Bailii, [2001] EUECJ C-408/98)
    Where a part or whole of a business was sold as a going concern, not all the VAT on the expenses of the sale was to be set off against VAT. The entire amount of VAT could only be set off where the assets sold were sold as a properly identifiable . .
  • Cited – Commissioners Of Customs and Excise v Thorn Materials Supply Limited and Thorn Resources Limited HL (Gazette 15-Jul-98, Times 25-Jun-98, House of Lords, House of Lords, Bailii, [1998] UKHL 23, [1998] 3 All ER 342, [1998] 1 WLR 1106, [1998] STC 725)
    When goods were purchased for resale to another company within the same VAT group but the purchasing company left that group before delivery, the entire transaction became a vatable supply. If there is an advance payment of less than the whole . .
  • Cited – Rompelman v Minister van Financien (Judgment) ECJ (Europa, C-268/83, [1985] ECR I-655)
    A trader who decided to acquire property for letting could claim repayment of VAT on the cost of a right to acquire a building which had not yet been constructed, let alone tenanted. . .
  • Cited – Belgische Staat v Ghent Coal Terminal (Judgment) ECJ (Times 04-Feb-98, Europa, C-37/95, [1998] ECR I-1, Bailii, [1998] EUECJ C-37/95)
    Once a right of deduction had been exercised because the inputs were for the purpose of investment work intended to be used in connection with taxable transactions, the authorities may not claim repayment merely because the taxpayer has been unable . .
  • Cited – Finanzamt Goslar v Breitshol (Judgment) ECJ (Europa, [2001] STC 355, C-400/98, Bailii, [2000] EUECJ C-400/98)
    . .
  • Cited – Midland Bank plc v Customs and Excise Commissioners ECJ (Times 16-Jun-00, Europa, C-98/98, [2000] STC 501, [2000] 1 WLR 2080, Bailii, [2000] EUECJ C-98/98)
    If there is a clear and direct link between the purchase of goods and their use in output transactions on which VAT was payable, input tax was deductible even if VAT was not deductible in respect of all the supplies. Where the link is indirect than . .

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