The Hanuman Commercial case at the First Tier Tribunal highlights the nuances of VAT liability when novating contracts. Stan Dencher, specialist tax writer at Croner-I, examines the ruling
In Hanuman Commercial Ltd [2018] TC 06249, the First Tier Tribunal ruled that the novation of a contract for the sale of land was not an exempt supply of land.
In this case, Hanuman Commercial Ltd (HCL) was used for a specific property deal involving an office block (the property) which was to be converted into residential flats.
On 27 January 2014, the owner of the property, Sabre Insurance Co Ltd (Sabre), which occupied part of the property, contracted to sell it to HCL for £2.8m (excluding VAT) (the Sabre contract). That contract was conditional on:
- Sabre ensuring that two of the tenants of the office block vacated the property; and
- HCL obtaining planning permission.
Both of these conditions could be waived by HCL unilaterally.
