The first Stamp Duty Land Tax (SDLT) case taken to the Tax Tribunal by HMRC has been won by the taxpayer. This victory is a vindication of the interpretation commonly applied to one aspect of SDLT regulations by experts although an appeal by HMRC is expected.
SDLT applies when property above a certain value is transferred or sold. A more detailed explanation is provided in our blog entitled “Stamp Duty Land Tax – Mitigation Techniques”. The interpretations applied to SDLT mitigation will become increasingly important as the top rate of tax rises in April from 4% to 5%. It is known that HMRC already have a number of cases that are under consideration of being brought before the tax tribunal although these may be nullified by the recent ruling.
The case brought before the Tax Tribunal centred on a sub-sale of a property to a partnership in which the intermediate buyer and other parties were connected persons. In essence, if person A sells to person B who then sub-sells on to Person C the sale A to B and sub-sale B to C could be deemed to be two separate transactions with SDLT due on both. Section 45 of the Finance Act 2003 allows for relief from this “double taxation” if certain criteria are met.
Although the relationships within the case were complex the Tax Tribunal ruled in favour of the taxpayer. The key plank of this method of SDLT mitigation was that HMRC commonly accepted that Section 45 of the Finance Act 2003 applied when two separate transactions occurred as part on a single completion process. However, it should be noted that the transaction was prior to December 2006 when SDLT “anti avoidance” legislation was put in place. Nevertheless the judgement gives comfort to all those who employed similar schemes.
Newshams have considerable experience in the field of Stamp Duty Land Tax mitigation. We will be studying the Tax Tribunal’s findings carefully and incorporating any recommendations into our existing practices.