Scottish Court of Session Decisions

Cumbernauld Development Corporation v. HM Commissioners of Customs & Excise [2002] ScotCS 1 (4th January, 2002)

SECOND DIVISION, INNER HOUSE, COURT OF SESSION
Lord Justice Clerk Lord Coulsfield Lord Maclean	XA194/00 OPINION OF THE COURT delivered by THE LORD JUSTICE CLERK in the APPEAL from a Decision of the VAT and Duties Tribunal dated 6 November 2000 in the cause CUMBERNAULD DEVELOPMENT CORPORATION Appellant; against H. M. COMMISSIONERS OF CUSTOMS & EXCISE Respondents: _______

 

 

Act: Tyre QC; Simpson & Marwick, W.S.

Alt: Young; Shepherd & Wedderburn, W.S.

4 January 2002

Introduction

1. This is an appeal against a Decision of the VAT and Duties Tribunal dated 6 November 2000 by which the Tribunal held that an assessment to VAT made by the respondents upon the appellant had been served timeously.
2. The appellant was the development authority for the former new town of Cumbernauld. During the 1990s, while the appellant was in the process of being wound up under the New Towns (Scotland) Act 1968, as amended, it divested itself of many of its assets and liabilities, the residue of which were transferred to the successor authority, North Lanarkshire Council.
3. The appellant's assets included two areas of land at Dullatur and Craigmarloch (the housing sites) which were zoned for housing development. The development of these sites was impeded by reason of the inadequacy of the access. The problem was caused by the location of the clubhouse and car park of Dullatur Golf Club.
4. To resolve the problem, the appellant and Dullatur Golf Club came to an agreement by which the Club would give the site of the clubhouse and car park (the DGC land) to the appellant, thereby releasing the development potential of the housing sites, and the appellant would give to the Club an adjacent tract of land owned by it extending to around 200 acres (the CDC land) which was for all practical purposes suitable only for public or recreational use. On this land the appellant agreed to provide the Club with an extension to the golf course and a new clubhouse and car park.

The Minute of Agreement

5. The appellant and the Golf Club concluded a Minute of Agreement dated 28 January and 17 February 1994. The conditions of the Minute of Agreement included the following:

" ... 3. DGC undertake to procure the conveyance to CDC of the DGC land all in accordance with the terms and conditions specified in Part 2 of the Schedule annexed and executed as relative hereto.

4. CDC undertake to procure the feuing to DGC of the CDC land all in accordance with the terms and conditions specified in Part 3 of the Schedule annexed and executed as relative hereto ... "

The Schedule to the Minute of Agreement regulated the conveyancing arrangements and related matters. In relation to the DGC land, Part 2 of the Schedule provided as follows:

"1. The subjects to be conveyed shall comprise ALL and WHOLE the said DGC land together with (1) the existing clubhouse erected thereon, (2) the whole heritable fittings and fixtures in the said existing clubhouse and (3) the whole parts, privileges and pertinents

2. The consideration payable shall be nil. The Disposition shall be granted in consideration of a counter Feu Disposition granted by CDC in favour of DGC.
3. The date of entry with actual vacant possession shall be the date upon which CDC as Employer in the Building Contracts in consultation with DGC through the Project Steering Group certifies that the Clubhouse Works are complete or such other date as may be mutually agreed (said date hereinafter being called 'the Transfer Date') ... "

The corresponding provisions in relation to the CDC land were in Part 3 of the Schedule and were as follows:

"1. The subjects to be feued shall comprise ALL and WHOLE the CDC land together with the erections (if any) thereon.

2. The consideration shall be nil. The Feu Disposition shall be granted in consideration of a counter-Disposition granted by DGC in favour of CDC.
3. The date of entry with actual vacant possession shall be the Transfer Date as defined in Part 2 of the Schedule ...

... 5. CDC warrant that CDC will at the Transfer Date exhibit a good and valid marketable title and deliver a duly executed Feu Disposition."

The implementation of the Minute of Agreement

[6] The parties to the Minute of Agreement envisaged that entry and occupation to the CDC land would be given on the same date as the delivery of the feu disposition; but that did not happen. The appellant gave occupation of the CDC land to the Club on 1 May 1996, but it was not until 6 March 1997 that the appellant delivered the feu disposition of the CDC land and the Club in exchange delivered the disposition of the DGC land.

The assessment

6. The transfer of the CDC land to the Golf Club constituted a "taxable supply" for the purposes of the VAT legislation. A question therefore arose as to the value to be attributed to that supply for VAT purposes. After an earlier reference of that question to the Tribunal in 1996, the parties came to an agreement that the consideration for the relevant supply should be valued at £1.505m. That agreement led to the making of an assessment based on that value in the sum of £263,375. The

the respondents gave notice of assessment to the appellant by letter dated 12 July 1999.

The appeal to the Tribunal

7. On 21 July 1999 the appellant gave notice of appeal to the Tribunal against the assessment on the ground that it had been served more than three years after the taxpoint and was therefore out of time. The respondents opposed the appeal.
8. By decision dated 6 November 2000 the Tribunal decided that the date of the supply of the CDC land by the appellant was the date on which title was given to the Club, which in the view of the Tribunal was the date on which the feu disposition by the appellant was delivered. The Tribunal therefore held that the assessment had been made timeously and refused the appeal. This is the decision appealed against.

The relevant legislation

The supply of goods

9. Section 4(2) of the Value Added Tax Act 1994 (the 1994 Act) provides that "a taxable supply" is a supply of goods or services made in the United Kingdom other than an exempt supply. Section 5(1) of the Act provides that Schedule 4 to the Act shall apply for determining what is, or is to be treated as, a supply of goods.
10. Paragraph 4 of Schedule 4 provides as follows:

"The grant, assignment or surrender of a major interest in land is a supply of goods."

Section 96(1) provides inter alia that

"'major interest' in relation to land ... in relation to Scotland means-

(a) the estate or interest of the proprietor of the dominium utile ... "

 

The time of supply

11. Section 6(2) of the 1994 Act provides, inter alia, as follows:

"(2) Subject to subsections (4) to (14) below, a supply of goods shall be treated as taking place - ...

(b) if the goods are not to be removed, at the time when they are made available to the person to whom they are supplied; ... "

Limitation on assessments

12. Section 77(1) of the 1994 Act (as amended by the Finance Act 1997, s. 47(10)) provides inter alia as follows:

"(1) Subject to the following provisions of this section, an assessment under section 73 ... shall not be made-

(a) more than 3 years after the end of the prescribed accounting period or importation or acquisition concerned ..."

It is agreed that the assessment in this case was one to which section 73 applied.

The submissions for the parties

13. Counsel for the appellant contended that the decision of the Tribunal was incorrect on a number of legal points; but his basic argument was that the Tribunal failed to give proper effect to section 6(2)(b) of the 1994 Act (supra) and should have held that the land was "made available" to the Club on 1 May 1996 when the appellant gave the Club occupation of the land.
14. Counsel for the respondents contended that while the assessment was made more than three years after the appellant gave the Club occupation of the land, it was not made more than three years after the appellant made available to the Club the "major interest" in the land that constituted the goods supplied.
15. The appeal to the Tribunal was conducted on the basis that the three years limitation period ran from either the date on which occupation was given or the date on which title passed. The Tribunal concluded that the latter date was the date of delivery of the feu disposition. The Tribunal did not consider whether the date on which title passed was the date of the recording of the disposition; but since the date of delivery was within the three years period, neither counsel considered that the point needed to be explored. When we raised the point, counsel for the appellant informed us that the feu disposition has not yet been recorded. The consequence of that is that if the taxpoint from which the limitation period runs is not 1 May 1966, it will be the date on which the appellant received payment from the Golf Club in the form of the disposition of the DGC land which, we may assume, the appellant recorded.
16. As a result, this appeal stands or falls on the proposition that in this case the supply was made when physical occupation was given.

Decision

17. The short point in this appeal is: what did the appellant make available to the Club on 1 May 1996? The argument for the appellant is that the Minute of Agreement was a contract for inter alia the supply to the Club of the CDC land and that on 1 May 1996 the appellant made the land available to the Club by granting occupation of the land which the Club was thereafter free to use for its own purposes. [19] In our opinion, that argument is unsound. The basic flaw in it is that it overlooks the nature of what was supplied in this case. The legislation is concerned with the supply of "goods." By the extended definition of that term in Schedule 4 to the 1994 Act, "goods" includes "a major interest in land." That, in turn, is defined by section 96(1) as being, in Scotland, "the estate or interest of the proprietor of the dominium utile." In our opinion, that expression must be interpreted to mean ownership of the land and not any lesser interest such as a right or a mere licence to occupy.
18. While the land itself was made available to the Club on 1 May 1996 in the sense that the Club was given the occupation and use of it, the interest of the appellant as proprietor of the dominium utile was not made available to the Club at that date. The Club had no more than a right in personam against the appellant to receive a conveyance in the form of a feu disposition. Meanwhile the appellant retained the major interest in the land as defined by section 96(1) of the Act.
19. On that view, it follows that the assessment appealed against was made timeously. We shall therefore refuse the appeal.