This case concerns the UK’s VAT option to tax and anti-avoidance ‘disapplication’ provisions. A vendor’s option is disapplied in certain cases where it is expected that a property will be sold and become a capital item of the purchaser (e.g. the purchaser will pay £250k or more plus VAT for the property) and the occupier will then use it mainly for exempt purposes. But where the option is thus disapplied, no VAT is chargeable to the purchaser, so the property does not in fact become a capital item following the sale. The First Tier Tribunal (FTT) has held that, in these circumstances, the vendor’s option is not disapplied and VAT must be charged on the sale. But the FTT also commented that the “circularity is to be deplored” in the legislation.
