Commentary

BB/16A/05 VAT ruling: Abbey National PLC—virtual assignments

Part V16 Forms and other HMRC material

BB/16A/05 VAT ruling: Abbey National PLC—virtual assignments

BB/16A/05 VAT ruling: Abbey National PLC—virtual assignments

Business Brief, Issue 16. 19 August 2005

This Business Brief article provides guidance on how to treat supplies of virtually assigned property and the use of VATA 1994 Sch 10 para 8, following the High Court case of Abbey National (CH/2004/APP/0496).

Background

Virtual assignment of property

The main issue in this case concerned property that had been leased to, and occupied by, Abbey National (“Abbey”). Abbey sought to outsource its property holdings, including its lease interests, to a third party, in return for a lump sum. In the case of property leased by Abbey, the leases were not generally legally assigned to the third party, as the landlord's permission had not, or could not, be obtained. However, the intention was to leave the third party in the same economic position as though the leases had been legally assigned to them, so that they could then grant purported leases of those properties back to Abbey. This was referred to as a “virtual assignment”.

The Tribunal (LON/2003/303) agreed with HM Customs & Excise (now HM Revenue & Customs—HMRC) that a “virtual assignment” back to Abbey of a property that had originally been virtually assigned to the third party was not a supply that came within art 13(B)(b) of the Sixth VAT Directive—“a leasing and letting of immovable property”. The Tribunal therefore agreed that there was a

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