The claimant, Realreed Limited, owned the freehold of Chelsea Cloisters, a block of over 600 flats, with 200 let as serviced apartments.

Realreed had accounted for VAT from 1992 until 2019 on the basis that its supplies of accommodation in the retained flats were exempt.

After years of apparently allowing the exempt status, in February 2019 HMRC informed Realreed that the transactions were taxable supplies of accommodation, rather than exempt.

Based on this decision, HMRC made assessments for unpaid VAT for £4,800,000 for the periods 02/15 to 01/19. Ultimately, Realreed appealed this decision.

In addition to its appeal, Realreed brought judicial review proceedings to challenge the decision to raise assessments for VAT. It contended that, even if the supplies of the accommodation were subject to VAT, the decision was ‘unreasonable and conspicuously unfair’. 

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