Proof of residential intent

The taxpayer company was set up to a large house with a view to selling it. It opted to tax the property from 21 November 2001.

The firm sold the house to a charity in July 2007. Steps were taken to ensure the transaction was a VAT-exempt supply because the buyer planned to use the property as a residential school for children with learning difficulties; it would have a relevant residential purpose.

The taxpayer argued the option to tax had no effect and the sale was exempt under VATA 1994 Sch 10 para 5(1)(b).

HMRC said that the taxpayer had not shown conclusively that the building would be used as a residential school as opposed to a non-residential one. It should therefore be treated as a standard-rated supply.

The taxpayer appealed.

The First-tier Tribunal said the taxpayer ought to have obtained a certificate or other physical evidence...