Centralan Property Ltd v Commissioners of Customs and Excise

C-63/04, 15 December 2005. Considered how Directive 77/388/EEC Art 20(3) should be applied to immoveable capital goods. C bought a building from a university, leasing it back to the university for 20 years. C subsequently granted a 999-year lease to it's subsidiary I, subject to the lease to the university. Three days later C sold the freehold reversion to the University. HC referred the case to ECJ ([2003] EWHC 44 (Ch), Abs66395) for a preliminary ruling as to whether the property had to be treated as if it had been applied for business activities which would be either fully taxable or exempt, or for business activities which were partly taxable and partly exempt in proportion to the value of the 999-year lease and the transfer of the freehold revision. "Held": as the lease was granted at a substantial premium and the reversion was transferred at a much lower price; as the transactions were linked and the first was exempt but the second one taxable; and as the transactions constituted supplies under Art 5(1) of the Directive; the property had been used in business activities which where partly taxable and partly exempt in proportion to the values of the transactions.