Wrag Barn Golf and Country Club v Revenue & Customs [2010] UKFTT 30 (TC) (14 January 2010)

DECISION

1. This appeal is generally referred to as the preliminary issue with the remaining issues in related appeals having been stayed pending the resolution of this preliminary issue.

2. This is an appeal against a decision of the Respondents contained in a letter dated 17 December 2002 and which is referred to as the “option to tax dispute”.

3. The decision of the Respondents contained in a letter dated 17 December 2002 was that the letter dated 27 June 1990 headed “option to tax” constituted an election by the partnership registered under VAT No.535 8425 31 with effect from 27 June 1990; that the land to which that election referred was “Wrag Barn Golf and Country Club”; that the election was effective from 27 June 1990; and that election is irrevocable.

The law

4. The preliminary issue falls to be determined under paragraph 2 of Schedule 6A to the Value Added Tax Act 1983 (“Schedule 6A”) because this is the legislation which was in force on 27 June 1990.

5. Paragraph 2 of Schedule 6A provides, so far as material:

“(1) Subject to sub-paragraph (2) and (3) and paragraph 3 below, where an election under this paragraph has effect in relation to any land, if and to the extent that any grant made in relation to it at a time when the election has effect by the person who made the election, or where that person is a body corporate by that person or a relevant associate, would (apart from this sub-paragraph) fall within Group 1 of Schedule 6 to this Act, the grant shall not fall within that group.”

2. Sub-paragraph 2(2) and (3) of Schedule 6A are not relevant for the present purposes.

Paragraph 3 of Schedule 6A provides, so far as material, that:

“(1) An election under paragraph 2 above shall have effect –

(a) Subject to the following provisions of this paragraph, from the beginning of the day on which the election is made or of any later date specified in the election;

(b) …

(2) An election under paragraph 2 above shall have effect in relation to any land specified, of a description specified, in the election.

…

(6) An election under paragraph 2 above shall be irrevocable and, except where it is an election of a description specified in a notice published by the Commissioners, shall not have effect unless –

(a) In a case to which sub-paragraph (10) below applies, the Commissioners have given the permission under that sub-paragraph;

(b) In any other case, written notification of the election is given to the Commissioners not later than the end of the period of 30 days beginning with the day on which the election is made, or not later than the end of such longer period beginning with that day as the Commissioners may in any particular case allow, together with such information as the Commissioners may require.”

Sub-paragraph 3(10) of Schedule 6A is not relevant for the present purposes.

The Partnership Act 1890

The Finance Act 1972 section 30 and Regulation 46 of the Value Added Tax (General) Regulations 1972, section 22(1) of the Finance Act 1972

(1) Section 30 Value Added Tax Act 1983 (1) the registration under this Act of persons carrying on a business in partnership … may be in the name of the firm; and no account shall be taken, in determining for any purpose of this act whether goods or services are supplied to or by such persons … of any change in the partnership.

(2) Without prejudice to section 36 of the Partnership Act 1890 (rights of persons dealing with the firm against apparent members of a firm) until the date on which a change in the partnership is notified to the Commissioners, a person who has ceased to be a member of a partnership shall be regarded as continuing to be a partner for the purposes of this Act and, in particular, for the purpose of any liability for tax on the supply of goods or services by the partnership …

The issue

Did the partnership, Wrag Barn Golf and Country Club, the Appellant, elect to waive exemption pursuant to paragraph 2 Schedule 6A to the Value Added Tax Act 1983?

The Appellant contends that:-

(1) the document made on 27 June 1990 the “option to tax” signed by Mr Manners on paper headed J H & S Manners was not the same entity as the Appellant. Was the entity registering for a VAT the landowners of the golfing partnership? The option to tax was made by the landowners but the Respondents wrongly inferred that it was a VAT registration by the golfing partnership.

(2) the contemporaneous documents are not clear and that there was a misunderstanding of the facts by the Respondents who tainted the documentation and that the oral evidence will clarify matters and cast a fresh light on the contemporaneous documentation.

(3) the Respondents failed to identify the correct parties and that it was not the present Appellant or its predecessor that made the election and that two separate entities had been allocated the same VAT registration number and that there was an administrative error by Customs back in 1990.

(4) originally it was intended that the Golf Club would be operated through a limited company to be owned equally by the four individuals but that the plan was shelved in favour of a four partner partnership. The golf course land remained in the ownership of Mr and Mrs Manners. That the golf course opened on 1 July 1990 and it was still the intention that the club would be run by the company but this changed to the decision to run the golf course through a partnership with the Deed being completed on 7 February 1991.

(5) the Appellant partnership was formed after 30 June 1990.

(6) in the years that followed 1990 Mr and Mrs Manners continued to make the occasional disposals of land from the original farm and that such transactions were accounted for by them alone and that it was only Mr and Mrs Manners who opted to tax in June 1990.

(7) the Appellant partnership has at all material times consisted of four partners originally Mr James Henry Manners and Mrs Suzanne Manners and their two sons and following the death of Mr James Henry Manners the four partners being Mrs Suzanne Manners, her two sons Timothy and Richard Manners and Verity Frances Manners.

(8) the partnership had never opted to tax the golf course land and that there would have been no benefit in doing so.

(9) the Appellant partnership came into being on or after 1 July 1990 at least four days after the election and to operate the golf course as evidenced by the former partnership agreement dated 7 February 1991.

(10) the identity of the entity that opted to tax is a question of fact which has to be determined in the light of all of the available evidence and not just the contemporaneous documentation.

(11) there was never a partnership consisting of Mr James Henry Manners and Mrs Suzanne Manners that alone traded the golf club and that the option to tax registered related to their activities as landowners.

(12) the VAT 1 was officially amended and that the wording on the form is not the same as that which was signed by Mrs Suzanne Manners.

(13) the Respondents wrongly treated the registration documentation as those relating to the golf club and that it was not the golf club registering for VAT. That the letter dated 16 August 1990 from Milne Ross the family’s accountants stated that the golf course was owned by Mr James Henry Manners and Mrs Suzanne Manners who had registered their land owning entity for VAT as a partnership and that the Respondents misunderstood the relevance of the reply and wrongly treated the June 1990 documentation.

(14) Ms Thomas unilaterally amended the VAT 2 records by adding the names of Mr and Mrs Manners two sons and that the golfing partnership now had a valid VAT registration number which was the same number which had been allocated to Mr James Henry Manners and Mrs Suzanne Manners but that they were two different entities and the option to tax is not binding on the Appellant partnership.

(15) at the time of the option to tax letter on 27 June 1990 there was a clear expectation of a transaction involving some divestment of the land and that the election refers to a disposal and that it would be most unlikely for an entity to opt to tax the land without some business cause for so doing and without contemplating such a transaction. There would be only two possibilities a disposal to the alleged golfing partnership of two or a disposal to the golfing partnership of four and that the only plausible option is that the intended disposal was to the partnership of four and that the golfing partnership is an entity distinct from Mr James Henry Manners and Mrs Suzanne Manners. If however the decision to dispense with the company was not reached until after 27 June 1990 then the intended disposal is most probably the disposal to the company.

(16) there was never any intention for there to be a golfing partnership of Mr James Henry Manners and Mrs Suzanne Manners and that the family had always conducted their farming activities on a joint basis with both generations and that this was how they approached the golfing venture and that Timothy Manners had been actively involved in the building of the golf course in the years prior to 1990 and considered himself as a full part of the enterprise and that Mrs Suzanne Manners was convinced that at no time whatsoever did she and her husband ever intend to operate the golf business without their sons.

(17) there was no partnership between Mr James Henry Manners and Mrs Suzanne Manners so far as the golfing activities were concerned and that there were two distinct entities the landowners and the golfing partnership.

(18) the golfing partnership did not come into being until 1 July 1990 at the earliest and that the partnership deed formally made on 7 February 1991 declares the partnership to have commenced on 1 July 1990. The wording of the partnership deed is consistent with the establishment of a new partnership rather than the addition of new partners to an existing firm. That the partnerships’ capital account indicated that the partnership was not in existence prior to 1 July 1990.

(19) a partnership cannot be treated as having made an election to tax before it came into existence.

(20) the trading name of “J H & S Manners” would be an unlikely trading name for a golf course and was not in fact the trading name adopted. The golfing activities were to be traded under the Wrag name.

(21) the key word “golf course club” and the trade classification number 8822 were not in Mrs Suzanne Manners’ handwriting and that the form had been officially amended.

(22) the VAT 1 showed an expected turnover in the following twelve months of £25,000 which was low and that the VAT 1 did not relate to the golfing trade.

(23) the golf course would have been used for the purposes of making taxable supplies and that all input tax incurred would have been recoverable and that an option to tax would have been against the partnerships’ interests and would have required the partners on a subsequent disposal of the land to have charged VAT on the sale price which would have restricted the ability of non-VAT registered entities to purchase the land and therefore suppressing its value.

(24) the entity registering for VAT was not one that involved the sons Timothy and Richard Manners but was for the landowning activities of Mr James Henry Manners and Suzanne Manners which explained the use of their own names up the head of the letters of 27 June 1990 and that there was an expected disposal by Mr and Mrs Manners as landowners to the golfing entity. That Mr James Henry Manners and Mrs Suzanne Manners registered for VAT in their capacity as landowners with an imminent transfer of the golf course in mind and that the golfing trade was carried out by the four individuals in partnership which was a separate entity from the landowners. That Mr James Henry Manners and Mrs Suzanne Manners were never the only partners in the golfing trade and that the Respondents had added the two sons’ names to their parents’ VAT registration unaware that this was a different entity.

(25) the VAT registration and the associated option to tax were actually made by a different entity.

The Respondents contend that:

1. As a result of the election letter dated 27 June 1990 Mr and Mrs Manners elected under paragraph 2 of Schedule 6A to waive exemption to tax in relation to the golf course.

2. The partnership between Mr and Mrs Manners carrying on business as a “golf course club” made its first supply on 27 June 1990 and that the partnership began trading on 27 June 1990.

3. The golf course from which the partnership was carrying on business was owned by Mr and Mrs Manners. The partnership was therefore operating from land wholly owned by the partners.

4. The partnership’s letter to the correspondent dated 27 June 1990 enclosing the VAT 1 and VAT2 and the election letter described the election letter as the partnership’s “option notice in respect of the Wrag Barn Golf Course”.

5. The election letter is dated 27 June 1990, it is written by the partnership to the Respondents, it is signed by Mr Manners a partner of the partnership and therefore binding on the partnership and is headed “option to tax” and refers to the “Wrag Barn Golf and Country Club” which, as a matter of construction, is a reference to specified land namely the golf course. The election letter gives express notice of the partnership’s election to waive exemption “on the dispersal” of the golf course pursuant to paragraph 2 of Schedule 6A.

6. There is no contemporaneous evidence to show that the partnership intended to dispose of the golf course in, or after, June 1990 and that it is not clear that Mr and Mrs Manners ever intended to transfer or otherwise dispose of their interests in the golf course to the company and that any such intention on the part of Mr and Manners appears to be inconsistent with the principal activity of the company as the “developer” of a golf club, rather than as the “operator” of the golf club. If Mr and Mrs Manners had ever had such an intention, this intention must have been “shelved” before 27 June 1990 as it is inconsistent with (i) the terms of the documents submitted by the partnership to the Respondents on 27 June 1990 (ii) Milne Ross’ letter dated 16 August 1990 and (iii) the partnership agreement.

7. That the only sensible construction of the election letter is that on 27 June 1990 the partnership, being Mr and Mrs Manners carrying on business together as a “Golf Course Club” elected to waive exemption to tax in relation to the golf course which was land that they owned and that the election is irrevocable.

8. That the evidence and submissions made by the Appellant are inconsistent with the contemporaneous documentation and that there is a lack of contemporaneous evidence to support the Appellant’s argument and assertions and that as the relevant events happened almost twenty years ago the documents should be given considerably more weight than the explanations provided by the Appellant which the Respondents considered to be inconsistent and to have been provided with the benefit of hindsight.

Findings of fact

1. Mr James Henry Manners and Mrs Suzanne Manners (“Mr and Mrs Manners”) purchased land at “Bellingham Farm” in 1967 and as their sons, Timothy Manners, the elder son and Richard Manners, the younger son grew up the sons were at home to help with the farming business and in due course worked as a team with their parents.

2. In 1984 Mr James Henry Manners became ill and the family moved to a cottage on the farm. Mr and Mrs Manners were given advice in respect of diversification and in 1987 were considering a golfing business.

3. On 1 July 1987 the company was incorporated and at some time thereafter the company was registered for VAT with number 484 9830 93. On 28 September 1987 the company became known as Wrag Barn Golf and Country Club Ltd. Mr and Mrs Manners were the directors of the company and Mrs Manners was the company secretary. The company’s principal activities were stated to be that of “developers of a golf club”. By 30 June 1990 the company had incurred costs totalling £152,843 in relation to the construction of the golf course on part of Wrag Farm (“the Golf Course”). The company reclaimed the input tax on the VAT returns it had made.

4. Mr Timothy James Henry Manners was a freehold farmer near Buscot in Oxfordshire in a farm business operated by himself and his wife Verity Frances Manners. Mr Timothy Manners was in charge of the construction of the golf course which was designed by a specialist golf course architect.

5. During the period of construction of the golf course discussions were held among the family and with professional advisers as to how the golf course would be run and operated.

6. At some time before 27 June 1990 a decision was taken that the golf course would be operated by a partnership and not by the company.

7. There is no contemporaneous evidence to support or explain the decision to operate the golf course by a partnership and not by a company.

8. On 27 June 1990 Mr and Mrs Manners elected under paragraph 2 of Schedule 6A to waive exemption to tax in relation to the golf course.

9. The partnership between Mr and Mrs Manners carrying on business as a “golf course club” made its first supply on 27 June 1990. The partnership between Mr and Mrs Manners carrying on business as a golf course club was in existence on 27 June 1990. The partnership began trading on 27 June 1990.

10. The golf course from which the partnership was carrying on business was owned by Mr and Mrs Manners and the partnership was therefore operating from land wholly owned by the partners.

11. The partnership’s letter to the Respondents dated 27 June 1990 which enclosed VAT 1 and VAT2 and the election letter described the election letter as the partnership’s “option notice in respect of the Wrag Barn Golf Course”.

12. The election letter is dated 27 June 1990. The election letter is written by the partnership to the Respondents. The election letter is signed by Mr Manners a partner of the partnership and is therefore binding on the partnership. The election letter is headed “option to tax”. The election letter refers to the “Wrag Barn Golf and Country Club”. The election letter gives express notice of the partnership’s election to waive exemption (option to tax) “on the disposal” of the golf course.

13. There is no contemporaneous evidence to show that the partnership intended to dispose of the golf course in or after June 1990. There is no evidence that Mr and Mrs Manners ever intended to transfer or otherwise dispose of their interests in the golf course to the company. The principal activity of the company was as the developer of the golf club and not as the operator of the golf club.

14. The letter written by Mr and Mrs Manners to HMRC in Gloucester and signed by Mr Manners was dated 27 June 1990 and received 29 June 1990. The letter enclosed forms VAT1 and VAT2 “to effect registration of the partnership with effect from 27 June 1990. In addition “we enclose our” option “notice in respect of the Wrag Barn Golf Course. Your early notification of registration would be appreciated”

15. The option to tax letter dated 27 June 1990 written by Mr and Mrs Manners and signed by Mr Manners is clearly headed “option to tax” and clearly states that “we hereby give notice of our election to waive exemption (option to tax) on the disposal of Wrag Barn Golf and Country Club pursuant to VATA 1983 of Sch. 6A s.2. The election to waive exemption is irrevocable in relation to the land on which the golf club is situate.

16. The VAT1 was dated 27 June 1990. J H & S Manners was crossed out and James Henry Manners and Suzanne Manners written in as the full name of the applicant with a trading name J H & S Manners. The business activity recorded at box 5 is “Golf Course Club” the date of first taxable supply is 27 June 1990 with a value of taxable supplies in the twelve months from that date entered as £25,000. The expected value of zero-rated supplies in the next twelve months was entered as nil. The box 15 related businesses for other VAT registration was ticked yes. Mrs Susan Manners declared that all the entered details and information in any accompanying documents are correct and complete and the form was signed by Mrs Manners and dated 27 June 1990. The form was stamped as having been received on 25 June `990 and was also stamped as being officially amended. The amendments appeared to have been made by more than one person. The registration was voluntarily. Although Mrs Manners may not have completed the form in its entirety herself Mrs Manners declared that all the entered details and information were correct and complete. The form was ticked that the status of business was a partnership. The VAT 1 was signed on behalf of the partnership by Mrs Manners. The VAT1 shows an expected turnover in the following twelve months of £25,000. The estimate was low. The value of the taxable supplies related to the expected supplies for the business activity of the golf course club. It was an anticipated figure.

17. The VAT2 form was signed by Mr and Mrs Manners on 27 June 1990. The form states that the notification on form VAT1 is for a partnership and lists the full names of Mr and Mrs Manners and is signed by Mr Manners and Mrs Manners on 27 June 1990. The names of Timothy James Henry Manners of Snowswick Farm Buscot Lechlade Gloucester, Richard John Manners of Field Farm, Longcot, Farringdon and Verity Frances Manners of Snowswick Farm, Buscot Lechlade Gloucester were also entered in the form but unsigned and were entered following a visit to the golf club by Ms Thomas an officer of the Respondents on 22 November 1990.

18. On 27 June 1990 a partnership of James Henry Manners and Suzanne Manners existed for the business activity of a golf course club, registered voluntarily for VAT and which entered into an election to waive exemption on the disposal of Wrag Barn Golf and Country Club.

19. For the period from 27 June 1990 to 16 August 1990 Mr and Mrs Manners traded as a partnership. In response to an enquiry by Ms A Wedley an officer of the Respondents dated 10 August 1990 Milne Ross chartered accountant applied on 16 August 1990 in a letter headed Wrag Barn Golf and Country Club Ltd and J & S Manners that the:

“1. The owners of the golf course and of the golf club are J & S Manners who are in partnership.

2. The partners always owned the land and allowed the limited company to carry out construction work on it.

3. No transfer has taken place.

4. The limited company has borne the expense of the construction work on the golf course and this is now being re-invoiced to the partnership. The date of the raising of the invoice is not known but the matter will be dealt with shortly. We will advice you as soon as this takes place.”

Milne Ross were acting on behalf of Wrag Barn Golf and Country Club Ltd and Mr and Mrs Manners and the letter accurately records the position at that date.

20. Timothy Manners and Richard Manners became partners with their parents Mr and Mrs Manners during the period beginning August 1990 to 22 November 1990 when it was recorded by Ms S Thomas visited the address and Wrag Barn Golf and Country Club on 22 November 1990 spending approximately two hours at the visit and meeting with Mrs Manners. There were difficulties reconciling the VAT return with any computer printout and it was explained to Mrs Manners the need to be able to prove the figures on the VAT return and it was noted that Mrs Manners had not mastered the computer but hopefully she would do so in time. A report on the visit was dated 22 November 1990 although was not also signed by Mrs Manners. It was noted on the record that input tax had been reclaimed for most of the course construction and it was then decided that the partnership should own the golf course and club. No output tax had been declared from the company and no input tax reclaimed by the partnership and so there was no loss to the revenue but it was noted that the company had obviously registered wrongly and it should have been intending trader. It was also noted that the bookkeeping was erratic and advice noted. The summary of trading activities and records was completed by Ms S Thomas and also dated 22 November 1990 with the contact details been given for Mrs Manners as partner and Milne Ross’ details as accountant. The main business activity was written down as Golf Course with trade classification 8822. The VAT registration number was given as being 535842531. Principal outputs were noted as being bar takings etc. subs, course fees. Principal inputs will be drinks etc. course maintenance, costs. Retail scheme A date adopted/approved 28.6.90. Documentation viewed at the meeting was ticked which included main records, subsidiary records and other non accounting records. Structure and organisation of the business was written down as being four partners - husband and wife and two sons – three active. It was noted that the club house would be built starting early 1991 with a retail scheme operating then, at present only course fees and subscriptions.

21. On 22 November 1990 the record of traders’ particulars with the registration number 535842531 with the effective date of registration 27 June 1990 and the certificate issued on 20 July 1990, was noted “VAT 12 to funds now in partnership stagger amended to 2”.

22. An amended certificate recording traders’ particulars was issued on 10 December 1990 with the traders’ particulars being recorded as James Henry Manners, Suzanne Manners, Timothy James Henry Manners, Richard John Manners, J H & S Manners 127 Hampton. Highworth, Swindon, Wilts SN6 7QA. Legal entity partnership trade classification 8822 sport. TheVAT2 for registration number 535842531 was updated with the names of Timothy James Henry Manners, Richard John Manners and Verity Francess Manners wife of Timothy Manners being added to the VAT2 which had been signed by Mr and Mrs Manners on 27 June 1990.

23. On 7 February 1991 a formal partnership agreement was entered into between Mr and Mrs Manners and Timothy Manners and Richard Manners. The four parties were referred to as the partners carrying on in partnership the business of a golf club under the name of the Wrag Farm golf club with the partnership said to have commenced on 1 July 1990 the partnership agreement provided that the partners shall be entitled to the net trading profits of the partnership business and bear all trading losses in equal shares. There are no contemporaneous documents to explain why the partnership agreement was not executed until 7 February 1991.

24. By a deed of gift executed on 7 February 1991 Mr and Mrs Manners conveyed the golf course to Mr and Mrs Manners and Timothy Manners and Richard Manners in fee simple upon trust to sell in equal shares. The deed of gift resulted in Mr and Mrs Manners transferring one half of the beneficial interest in the golf course to their sons.

25. There is no record in the company’s 1990 accounts that any rent was ever paid to Mr and Mrs Manners in respect of the company’s use and occupation of the golf course.

26. In 1991 a club house was constructed on the golf course and paid for by the partnership. £52,640 was entered into the partnerships’ 1991 accounts for the period ended 30 April 1991.

27. The company was dissolved in 1995.

28. On 27 June 1990 the partnership comprising Mr and Mrs Manners elected under paragraph 2 of Schedule 6A to waive exemption to tax in relation to the golf course.

Reasons for decision

29. The preliminary issue falls to be determined under paragraph 2 of Schedule 6A to the Value Added Tax 1983 as this is the legislation which was in force on 27 June 1990.

30. The election letter dated 27 June 1990 was written by the partnership to the Respondents and was signed by Mr Manners a partner of the partnership and the election is binding on the partnership. The letter is headed “option to tax” refers to the Wrag Barn Golf and Country Club and gives express notice of the partnerships’ election to waive exemption on the disposal of the golf course pursuant to paragraph 2 of Schedule 6A.

31. The election is irrevocable.

32. There is no contemporaneous evidence to support or explain the nature of the professional advice given to Mr and Mrs Manners in June 1990 in relation to the election letter and there is no contemporaneous evidence to support or explain whether Mr and Mrs Manners anticipated disposing of the golf course in June 1990.

33. In their oral evidence Mrs Manners and Mr Timothy Manners endeavoured to recall accurately events which took place nineteen years ago. In her evidence Mrs Manners confirmed that the legal partners were her husband and herself and that her two sons were also going to run the golf course business. When asked whether this was from the beginning of the partnership or whether her sons joined later Mrs Manners gave evidence that “she thought that the sons had been partners from the outset but on the other hand they may not have been”. Mrs Manners was asked whether there had been any intention to dispose of the land in June 1990 and she recalled that consideration was given to a possible sale of the company. In June 1990 Mr Mercer was the professional adviser and she trusted him completely. Mr Timothy Manners was not sure and could not recall whether the partnership had been set up to develop or operate the golf club. Mr Manners did not do the paperwork. Mr Manners could not recall the date when he became a partner but had not intended to spend his time building the golf course and not be within the partnership. Mr Manners was clear in his evidence that he could not remember the date when he became a partner but did recall that the golf club had opened in the summer of 1990 and was trading properly in February 1991 when memberships were commenced. Green fees would have been taken around 1 July 1990.

34. Mr Thomas John Deacon, an officer of the Respondents, visited the Wrag Barn Golf and Country Club to verify the VAT return for the prescribed accounting period from 1 February 2001 to 30 April 2001 and interviewed Mr John Lister the accounts manager for Wrag Barn Golf and Country Club. Mr Deacon considered the documentary evidence and was unable to assist further with the visit made by Ms Thomas in November 1990. The Respondents had not received notification from the Appellant that there was anything wrong with the registration documentation or with the election to tax for some considerable period of time. Mr Deacon’s approach is based solely on the documentation before him.

35. The oral evidence was given honestly but witnesses were not surprisingly unable to recall the details of events nineteen years ago.

36. The best evidence available in order to determine the preliminary issue is the contemporaneous documents which clearly show that on 27 June 1990 the partnership of Mr and Mrs Manners elected under paragraph 2 of Schedule 6A to waive exemption to tax in relation to the golf course.

37. The costs relating to the construction of the golf course had been incurred by the company and the company had already recovered the input tax in respect of those costs.

38. Mr Timothy Manners had no recollection of the election having been made because Mr and Mrs Manners made the election before their sons Timothy Manners and Richard Manners became partners of the partnership.

39. The partnership agreement was executed on 7 February 1991 although the partnership was stated to have commenced trading on 1 July 1990 as a “golf club” under the name Wrag Farm Golf Club. The deed of gift was executed the same day resulting in Mr and Mrs Manners transferring half the beneficial interest in the golf course to their sons. In her evidence Mrs Manners accepted that the date of 1 July 1990 for the commencement of the partnership was for administrative convenience.

40. There was a partnership of Mr and Mrs Manners in existence on 27 June 1990 and the main business activity was the golf course. The letter dated 16 August 1990 from Milne Ross the chartered accountants acting on behalf of Wrag Barn Golf and Country Club Ltd and J & S Manners confirmed that the owners of the golf course and of the golf club are J & S Manners who are in partnership and that the partners always owned the land and allowed the limited company to carry out construction work on it and that no transfer had taken place. The partnership of Mr and Mrs Manners at a date prior to 27 June 1990 and no doubt with professional advice proceeded to effect registration of the partnership from 27 June 1990 for VAT and gave notice in respect of the partnership election to waive exemption (option to tax) on the disposal of Wrag Barn Golf and Country Club such notice being specified pursuant to VATA 1983 Sch. 6A s.2. The notice was only signed by Mr Manners and the registration for VAT only by Mrs Manners but both documents were valid and binding on the partnership. The partnership of Mr and Mrs Manners related to the golf course business which was carried out in common with a view of profit. The partnership was oral and could be inferred from the intention of the parties without there being an express agreement. There was a consensus between Mr and Mrs Manners. There was a business and there was a view to profit. Mr and Mrs Manners were taxable persons trading jointly and thus under a joint tax liability arising out of their partnership enterprise. Case law relating to partnership in particular:

Kavita Pal, Rajinder Pal, Enrique Quillen, Alonso and Hicham Benlachgar El,

Bouacheri v Commissioners for Revenue and Customs (2006) VAT Decision 19463,

Customs and Excise Commissioners v Glassborow & Another 1 QB 1975 and

Blythe Limited Partnership, VD 16011 19 March 1999 was considered

and it was decided that there was a clear partnership in existence in June 1990 of Mr and Mrs Manners in respect of the golf course business and that the declarations signed by Mrs Manners on 27 June 1990 on the VAT1 did relate to the business activity of the golf course club and was in respect of the partnership of Mr and Mrs Manners and that Mr Manners had given the notice of Mr and Mrs Manners election to waive exemption (option to tax) on 27 June 1990. There was no disposal and no disposal anticipated. The registration to VAT was so that the partnership could carry on the business as a golf club. The reference to the disposal of Wrag Barn Golf and Country Club in the notice dated 27 June 1990 does not change the operation of the notice of the election by the partners to waive exemption. The election was binding on the partnership.

41. Timothy Manners and Richard Manners joined the partnership and the golf club business on a date between 1 July 1990 and 7 February 1991 when the formal partnership agreement and deed of gift were executed. Timothy Manners and Richard Manners were correctly shown in the updated business registration for VAT.

42. The fact that a partnership does not have a legal identity in England and Wales means that the admission of a new partner creates a new partnership rather than changes the composition of an old one. In the absence of any contrary provision, this would give rise to a requirement to register and deregister their new and old firms respectively, or transfer the registration, on the occasion of each admission. The inconvenience of the situation is recognised by the legislation and VATA 1994 section 45(1) later provided that, in determining whether goods or services are supplied to or by persons carrying on a business in partnership, no account is taken of any change in the partnership. This provision is designed and intended to record that, for registration purposes, a business carried on in the name of a firm is to be treated as a continuing business notwithstanding changes in its composition. Prior to the VATA 1994 section 30 of the Value Added Tax Act 1983 section (1) provided that the registration under this Act of persons carrying on a business in partnership may be in the name of the firm; and no account shall be taken, in determining for any purpose of this Act whether goods or services are supplied to or by such persons, of any change in the partnership. The election to waive exemption is binding on the partnership of Mr and Mrs Manners and Timothy and Richard Manners. The deed of gift dated 7 February 1991 gave effect to the transfer from Mr and Mrs Manners of one half of the land to Timothy and Richard Manners and was not from one entity to another entity and was not to a new golfing partnership. The deed of gift was consistent with Timothy Manners and Richard Manners joining the partnership and carrying on the business of running the golf course.

43 The oral evidence of Mrs Manners and Timothy Manners was given honestly and as well as they could bearing in mind the considerable passage of time and both gave evidence that they had difficulty in recalling information and dates. In his witness statement Mr Timothy Manners had given evidence that the cost of construction was borne by the farming business which he accepted was not correct. Mr Manners was unable to recall whether the partnership was set up to develop or operate the golf course and at the time he gave evidence that he had his own business as well and his brother had a tenanted farm. Mr Manners did not do the paperwork but was involved in the construction of the golf course. Mrs Manners gave evidence that she and her husband had owned the land and that no one else owned any land until land was gifted to the golf course and gave evidence that it was a long time ago and that it was complicated. Mrs Manners could not recall the professional advice. The clear documentary evidence of the partnership letter to the Respondents dated 27 June 1990 enclosing the completed VAT1 and VAT 2 and the clear election letter also dated 27 June 1990 and headed “option to tax” and signed by Mr Manners a partner and giving express notice of the partnership’s election to waive exemption is preferred to the evidence on behalf of the Appellant. The construction of the election letter of 27 June 1990 is that the partnership of Mr and Mrs Manners carrying on business together as a golf course club elected to waive exemption to tax in relation to the golf course which was land that they owned and that the election made by Mr and Mrs Manners is irrevocable and binding on the partnership which was later joined by Timothy and Richard Manners.

44. The entity that registered for VAT in June 1990 is not a separate entity from the golfing partnership as submitted by the Appellant. The VAT registration by Mr and Mrs Manners was in respect of the golf course club as correctly set out in the VAT1 dated 27 June 1990. By 22 November 1990 the summary of trading activities and records for VAT registration number 535842531 which clearly gives the address of Wrag Barn Golf Club Sevenhampton with the main business activity of golf course sets out the structure and organisation of the business as being of four partners, husband and wife and two sons, three active.

45. Subject to any agreement express or implied between the partners, no person may be introduced as a partner without the consent of all existing partners. The terms on which a partner is admitted is therefore usually determined by express agreement. It is accepted that Mr and Mrs Manners always intended at some stage to bring in their sons into the partnership of the Wrag Barn Golf and Country Club which they had developed as directors of the Wrag Barn Golf and Country Club Ltd. Timothy Manners and Richard Manners were not partners with their parents Mr and Mrs Manners in August 1990. The letter from Milne Ross chartered accountants dated 16 August 1990 clearly states that the owners of the golf course and the golf club are J & S Manners who are in partnership and that the partners always owned the land and allowed the limited company to carry out construction work on it. However by 22 November 1990 Timothy Manners and Richard Manners had joined the partnership as confirmed by the summary of trading activities and records for registration number VAT 535 8425 31 giving the address as Wrag Barn Golf Club Sevenhampton with the main business activity of golf course and stating that there were four partners, husband, wife and two sons, three active. The oral partnership was formalised by the partnership agreement of 7 February 1991 and the deed of gift executed on the same day. There are no contemporaneous documents available to explain why the partnership agreement and deed of gift were not executed until 7 February 1991. In 1991 the Club house was constructed on the golf course which was paid for by the partnership who continued to trade from the golf course until 2000.

46. Having carefully considered all of the evidence it was decided that the best evidence available after such a long period of time is clearly the contemporaneous documentation. It was decided that the documents should be given considerably more weight and the documentary evidence was preferred. It was therefore decided that the contemporaneous documentation clearly shows that on 27 June 1990 the partnership of Mr James Henry Manners and Mrs Susan Manners elected under paragraph 2 of Schedule 6A to the Value Added Tax Act 1983 to waive exemption to tax in relation to the golf course and that this election is irrevocable and binding on the later partners James Henry Manners, Susan Manners, Timothy James Henry Manners and Richard John Manners the partners pursuant to the partnership agreement of 7 February 1991 and that accordingly the appeal in respect of the preliminary issue relating to the option to tax dispute is dismissed.

47. Unless either party objects within 21 days it is directed under paragraph 7 of Schedule 3 to the Transfer of Tribunal Functions and Revenue and Customs Appeal Order 2009 that rule 29 of the VAT Tribunals Rules 1986 applies to this appeal, otherwise the 2009 rules apply.

First-tier Tribunal (Tax)

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS Respondents

MRS F J GREEN

TRIBUNAL JUDGE

RELEASE DATE: 14 January 2010

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You are here: BAILII >> Databases >> First-tier Tribunal (Tax) >> Wrag Barn Golf and Country Club v Revenue & Customs [2010] UKFTT 30 (TC) (14 January 2010) URL: http://www.bailii.org/uk/cases/UKFTT/TC/2010/TC00344.html Cite as: [2010] UKFTT 30 (TC)