Case report: No repayment supplement on assigned VAT credit

Decision released 2 September 2021

In Bollinway Properties Ltd [2021] TC 08251, the First-tier Tribunal (FTT) dismissed an appeal against a refusal by HMRC to pay a repayment supplement where the right to a VAT credit was assigned to a third party.


Bollinway incurred a substantial sum of VAT on the purchase of a property portfolio from Toys R Us Properties Limited (TRUP). At the time of the transfer, both TRUP and Bollinway were owned by Acepark Ltd who had bought TRUP for £1 following the appointment of a receiver for the Toys ’R’ Us holding company that had owned TRUP.

On 1 October 2018, TRUP raised an invoice to Bollinway for the sale of the properties plus VAT in excess of £70m and ceased to trade.

On 2 November 2018, a 10/18 VAT return was submitted, by MHA Moore and Smalley (MHA), on behalf of Bollinway with a covering letter that suggested, due to the unusually large amount, appropriate entries be made in the VAT records of both TRUP and Bollinway rather than HMRC making a repayment to Bollinway and awaiting the payment from TRUP.

Various enquiries were made by the compliance manager for the Toys R Us group on 19 and 20 November 2018 and, on 21 November, HMRC informed MHA the 08/18 and 09/18 TRUP VAT returns had been selected for review, along with the Bollinway VAT return.

On 26 November MHA responded to queries in relation to Bollinway and provided copies of:

(1)the sales invoice;

(2)a schedule of properties; and

(3)a call option agreement dated 12 August 2018, and an undated but signed option notice which the FTT referred to collectively as ‘the Transaction Documents’.

On 18 December, and following a further request from HMRC for evidence confirming the change in legal ownership had occurred, MHA provided copies of the forms transferring title to each of the properties (TR1s)

The set off was entered onto the system on 20 December 2018 and a remaining balance was released to Bollinway on 21 December 2018.

Bollinway subsequently requested a repayment supplement, which was paid only on the remaining balance and not on the set-off amount.

Bollinway argued the relevant period, computed in accordance with SI 1995/2518, Regs. 198 and 199 had exceeded 30 days and therefore under VATA 1994, s. 79 a supplement of 5% was due. Although they accepted such large sums between connected parties would raise real concerns, they felt HMRC had not dealt with the situation efficiently and only 4 days of reasonable enquiries relating to the Bollinway return should be left out of account.

HMRC, on the other hand, considered a repayment supplement on the set-off amount would represent a windfall. Repayment supplement was only due where an actual payment or refund was due to the taxpayer but Bollinway had foregone payment of that part to be shown as a credit and off set with TRUP’s VAT return. Alternatively, Bollinway had requested the credit should be set off against an amount due from TRUP that was only fully identified on submission of the TRUP VAT return on 10 December 2018. The full set of back up documents requested from Bollinway was only provided on 18 December, and the time taken by Bollinway to provide a letter of authorisation for the set-off should also be left out of the 30 days calculation.

It was common ground Bollinway was entitled to a VAT credit. Dismissing the appeal, however, the FTT concluded Bollinway had assigned entitlement to the set off amount to TRUP, as stated in their Letter of Authorisation, and once it had assigned the right to that part of the VAT credit, it was no longer entitled to it. TRUP was entitled to it. Bollinway was therefore no longer able to claim the payment of the repayment supplement under VATA 1994, s. 79 if HMRC failed to meet the relevant period conditions for its inquiries into the Bollinway VAT return.

If, however, that was wrong and Bollinway could continue to rely on s. 79 the FTT considered the relevant period rules under s. 79.

The FTT found that it was reasonable for HMRC to request a ‘full set of backing documents’ for the property transfers. The Transaction Documents provided by MHA, on 26 November 2018, did not show that legal transfer had taken place. It was therefore only much later when the TR1’s were provided that HMRC could be said to have received a complete answer to that request. The period from 23 November to 18 December should be excluded from the calculation of the relevant period. On that basis HMRC had completed the written instruction directing the making of the payment in 23 days which was within the relevant period of 30 days, and no repayment supplement was due.


The novel circumstances of this case, where a substantial repayment was assigned to a third party, might have restricted its application more generally, but the comments in relation to the relevant period rules will be of interest to anyone trying to establish if a repayment supplement is due.

Consideration was given to what constituted a reasonable inquiry, and the responsibility of ensuring a complete answer had been provided.

Both parties referred to Customs and Excise Commissioners v L Rowland & Co (Retail) Ltd. [1992] BVC 102 and the FTT followed its finding that it was for the taxpayer to justify a claim for repayment once an inquiry had been raised with them and to provide a complete answer.

For commentary on repayment supplement, see In-Depth at ¶60-650.

Comment by Angela Bedi, Senior Tax Writer, Croner-i Ltd

[2021] UKFTT 0309 (TC)

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