Entitlement to repayment supplement on credit assigned to a connected company

Toys “R” Us Properties Ltd (TRUP) sold a property portfolio to a connected company Bollinway Properties Ltd for £355m plus VAT of £71m. TRUP raised a tax invoice for the sale on 1 October 2018 and Bollinway was entitled to an input tax credit of £71m in its VAT return because it had opted to tax the portfolio on 17 September 2018. The result was that Bollinway submitted a repayment return for £71m on 2 November 2018 for its period to 31 October 2018.

TRUP submitted returns based on special tax periods – its return for the period ending 3 November 2018 was submitted on the due date of 10 December 2018 creating a liability of £71m.

Bollinway asked for the £71m VAT repayment to be credited to the VAT account of TRUP – an offset – and HMRC agreed to this but the credit was not...