Virtually standard

Abbey National owned 1 000 leasehold and freehold properties which in 2000 it agreed to sell to M Ltd. Abbey intended to lease back the properties that it wished to occupy. The shorter leases were transferred to M Ltd by a virtual assignment so that the economic benefits and burdens were transferred to M Ltd and Abbey paid a principal fee to M Ltd as if there had been a formal lease back. With regard to sublet properties M Ltd was entitled to receive rent from the underlessees. HMRC decided that in neither of these situations was there an exempt supply consisting of leasing or letting of immoveable property within the meaning of Article 13B(b)1 of the Sixth Directive. Rather there was a standard-rated supply of agency and property management services.
Abbey appealed. The VAT tribunal dismissed the appeal in relation to the principal...