The case concerned the validity of an option to tax made by Rolldeen Estates Ltd (REL) in respect of a property. REL argued that it made VAT exempt supplies of leases of the property prior to making the option and therefore HMRC’s permission was required to opt to tax. HMRC relied on the provisions in the VAT Act 1994 which allow them to retrospectively dispense with the permission requirements. The First-tier Tribunal concluded that REL had ‘purportedly exercised’ the OTT and it was entirely reasonable and appropriate for HMRC to deem the OTT to have been validly exercised. The appeal was dismissed and the £50,000 assessment for the sale of the property is valid. This case confirms that if VAT exempt supplies of a property have been made prior to the proposed date of an option to tax and both HMRC and a taxpayer operate on the basis that the OTT is effective, then HMRC is allowed, under paragraph 30, to dispense the permission rule.
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