Summary

Where it was unclear whether a judge had actually considered and determined an issue concerning ownership of a partnership asset forming the subject of an option to tax, the matter had to be remitted for a fresh hearing, even though the judge's general findings, which led to an inferred conclusion on ownership, were not irrational.

Facts

The appellant partnership (W) appealed against a First-tier Tribunal decision that W was bound by an option to tax exercised in June 1990.

W was a family partnership between a husband and wife and their two sons, which according to the partnership deed commenced in July 1990 for the purposes of running a golf club, which had been created on the parents' land. In June 1990 the father wrote to the Revenue providing completed forms VAT1 and VAT2 in respect of W, although no reference was made to the sons in either of the forms, or the option notice, which was also included providing notice of the election to waive exemption on the disposal of the club. The family's accountants wrote to the Revenue in August 1990 answering various questions and providing confirmation that the parents were the club's owners. The Revenue was informed at a meeting with the mother in November 1990 that the sons were by then partners in the club and the VAT registration was subsequently amended. In February 1991, when the partnership deed was created, the parents executed a deed of gift conveying the land on which the club was sited to themselves and the sons. The judge found, amongst other things, that a partnership between the parents began trading and made its first supply in June 1990, and that the respondent commissioners were correct in determining that W was bound by the option exercised in June 1990.

W argued that the factual conclusion was wrong and the judge should have decided that there were two partnerships: one between the parents as landowners and another between the parents and the sons as the club's proprietors; further, the transfer of the land was a separate event which nullified the election since the parents alone were no longer in a position to dispose of the land.

Held

The limited documentary evidence and the witnesses' poor recollection of the relevant events made the fact-finding task difficult for the judge. That appeared to have led to a failure to make findings, or to make only unclear findings on a number of matters. However, it was not possible to challenge the judge's conclusion that the form VAT1 should be treated as reliable. The findings concerning the existence of the partnership, its registration for VAT and when it began making supplies were consistent with the VAT1 and with the accountant's August 1990 letter, and were not inconsistent with any other evidence. W's relatively minor objections led only to the possibility that a different judge might have reached a different conclusion, not that the conclusion was irrational. It might be correct that there was no good reason for W to opt to waive the exemption in June 1990. However, the same objection arose in relation to the land-owning partnership, if it existed, exercising the option: whether there was one partnership or two, the election served no useful purpose. It was clear that the family had decided sometime prior to the meeting with the Revenue in November 1990 that the sons would be admitted to the golf partnership, and what the effective commencement date of the new partnership would be. But it was impossible to discern from the accountant's letter of August 1990 that the parents intended prior to June 1990 to dispose of the land to that partnership. That letter contained no hint of any such intention and was actually consistent with the existence of a single partnership. The judge's finding that the sons joined W some time between August and November 1990 was consistent with the evidence before the tribunal and any conclusion to the contrary might be considered perverse. However, although the judge's determination implied a finding that the land was an asset of W, it was not apparent from the decision whether the judge addressed her mind to the point at all. Therefore, it was not possible to be confident that the judge did in fact make such a finding, particularly as the documentary evidence was unclear. The matter therefore had to be remitted to the First-tier Tribunal (see paras 35-41 of judgment).

Appeal allowed