TC09531 - [2025] UKFTT 00567 (TC)

It is not necessary to consider in any detail the underlying VAT Assessments or VAT Appeals but a short summary is appropriate. NNN owned and had been redeveloping a property at Tower Bridge Road and sought to recover the development input tax on the basis that it had opted to tax and would charge taxable rent.

HMRC’s preferred approach to the proper VAT treatment of the redevelopment is to argue that the option to tax was ineffective because NNN intended to let the property to a connected company that is unable to recover VAT, namely a nursery of which Ms Adeosun was a director. Accordingly, none of the £606,164 of VAT sought to be reclaimed could be recovered.

HMRC’s alternative view is that, even if the option to tax is valid, the invoices supplied to HMRC to justify the VAT recovery were false and, further, some of the bank statements supplied to HMRC to support the input tax recovery had been altered. On that basis £450,341 of the VAT reclaimed should be denied.

Whether any penalty or the PLN might be payable – and which one - therefore depends at least initially on which, if any, of HMRC’s views prevail. Even if that were the case, whether the penalty is ultimately payable would also depend on whether that penalty or PLN is properly chargeable under the relevant penalty legislation but it must be the case that they are in any event contingent on the VAT Appeals. For HMRC, it was accepted that there are three permutations as to the impact on the Penalty Notices and the PLN, namely: