For that reason, the Respondents HMRC, and HM Treasury are alert to mechanisms which taxable traders running exempt businesses might use in order to get that benefit without bearing that burden. The legislation that the court must analyse in the present appeal is aimed in part at preventing that kind of mechanism being used in respect of transactions in land.
Drafting tax legislation is a difficult and complex task so it is not surprising that sometimes the legislation does not quite work. It is common ground that this appeal arises because of one such occasion. Problems can arise in particular where, as here, provisions that were drafted in an enactment for one purpose are incorporated by cross-reference into a different enactment dealing with something else. The drafter does not spot that there might be a circumstance in which the imported provisions which work perfectly well in their original setting, create a conundrum in their new setting. If that circumstance arises, it falls to the court to decide how the legislation applies, giving effect to Parliament’s intention and the purpose for which the provisions relevant to the appeal were enacted.
The dispute between HMRC and the Appellant, Mr Moulsdale, arises over whether Mr Moulsdale ought to have charged VAT on the sale price of a property which he sold to an unconnected purchaser in September 2014. The legislation which determines whether VAT is chargeable on that sale of his land is Schedule 10 to the Value Added Tax Act 1994 (“VATA”) (“Schedule 10”), given effect by section 51 VATA. Very broadly, the effect of the provisions as drafted appears to be that if Mr Moulsdale intended or expected to add VAT to the price he was charging for the land, then VAT was not chargeable on the sale so he did not need to add VAT. But if Mr Moulsdale did not intend or expect that the purchaser would pay VAT on the price, then the transaction was liable to VAT and so he ought to have added VAT to the purchase price.
Mr Moulsdale in fact did not charge VAT on the price of the land charged to the purchaser but HMRC subsequently assessed him to VAT as if the sale price had been inclusive of VAT. HMRC took the view that the way out of the problem generated by the provisions resulted in VAT being payable. Mr Moulsdale appealed against that assessment. His appeal was refused by the First-tier Tribunal, by the Upper Tribunal and by a majority in the Court of Session Inner House. He now appeals to this court.
Source: gov.uk
