Ingram v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judgment Date | 08 November 1985 |
| Date | 08 November 1985 |
| Court | Chancery Division |
Chancery Division.
Mr. Andrew Park Q.C. and Mr. D.J. Goy (instructed by Messrs. Ingram, Ansell & Levy) for the taxpayer.
Mr. D.C. Potter Q.C. and Mr. J.F. Mummery (instructed by the Solicitor of Inland Revenue) for the Crown.
Before: Vinelott J.
Stamp duty - Tax avoidance - Composite transaction - Pre-ordained series of transactions - Scheme to save stamp duty on purchase of property - Steps inserted solely for tax avoidance purposes - Whether intention to save stamp duty relevant to substance of transaction for stamp duty purposes - Whether Ramsay principle applicable to stamp duty -Stamp Act 1891 section 12 section 13 section 58 subsec-or-para (4)Stamp Act 1891, sec; 12, 13, 58(4).
This was an appeal by the taxpayer against a decision of the Commissioners that the transfer to the taxpayer of certain registered land was chargeable to ad valorem stamp duty on the sum of £145,600 the aggregate of the premium payable for the grant of a long lease and the consideration for the subsale of the property.
The taxpayer negotiated the purchase of a freehold dwelling-house with vacant possession for £145,500. She agreed to participate in a scheme that was in common use at that time in relation to which a number of documents were executed, designed to reduce very substantially the amount of stamp duty which she would otherwise have paid had she bought the property by straightforward conventional contract and transfer. Thus on 17 February 1984 the taxpayer and the vendor of the property agreed for a 999-year lease of the property at a premium of £145,000 and an annual rent of £25. She paid a deposit of £14,500 to the vendor on entering into that agreement. On 21 February 1984 the vendor contracted to sell the property subject to the lease to U.S. Ltd., the company, for £500. The company had been incorporated in 1981, its shareholders and directors being the partners in the firm of solicitors who acted for the taxpayer and included her husband. On 23 February 1984 the company agreed on a subsale of the property to the taxpayer for £600. On 16 March 1984 the property was transferred by the vendor to the company and thereafter to the taxpayer in accordance with the terms of the earlier agreement and the payments being made to the vendor of £145,000 and £500. The transfer was presented for adjudication under the Stamp Act 1891, Stamp Act 1891 section 12sec. 12. The Commissioners rejected the taxpayer's case that Stamp Act 1891 section 59sec. 59 of the Act operated to exclude from the charge to duty both the agreement for the lease of 17 February and the contracts for the sale of the property subject to the agreement for the lease dated 21 and 23 February. They also refused to accept her argument that the transfer was dutiable only in respect of the consideration of £600 paid by her on the subpurchase. The Commissioners decided that having regard to all the circumstances the transfer was chargeable to duty by reference to the amount of the consideration for the sale being £145,000. The taxpayer appealed.
At the hearing of the appeal the Crown's case was that ad valorem stamp duty, although a tax on instruments, had to be assessed by reference to the transaction that the instrument intended to effect. The true nature and effect of the instrument transferring the property to the taxpayer was to convey the unencumbered freehold property to her, the consideration for that sale being £145,600. Further it was argued that, as the sole purpose of the scheme was undisputably the avoidance of tax, the principle laid down in the Ramsay and Furniss v. Dawson cases applied. That principle required that a "composite transaction" or a "pre-ordained series of transactions" be treated as a single transaction achieving the pre-ordained end. Therefore, the transfer was to be treated as accomplishing the transfer of the unencumbered freehold interest in the property to the taxpayer at the agreed price and the lease agreements were to be disregarded.
For the taxpayer it was argued that stamp duty was charged on instruments and not on transactions. Thus on the true analysis of the several transactions in the scheme the position was as follows: (1) the agreement for the lease was excepted from the charge to duty byStamp Act 1891 section 59sec. 59 of the Act; (2)Stamp Act 1891 section 59section 59 also excluded from charge the contracts for the sale of the property subject to the lease agreement, and (3) the transfer completed the sale from the vendor to the company and from the company to the taxpayer and it was by virtue ofStamp Act 1891 section 58 subsec-or-para (4)sec. 58(4)of the Act to be charged with the duty in respect of the consideration moving from the taxpayer as sub-purchaser, namely the sum of £600. Further the taxpayer contended that the Ramsay principle had no application in the field of stamp duty.
Held, dismissing the taxpayer's appeal:
1. Stamp duty was a tax on instruments but to determine whether an instrument fell within a chargeable category and the duty was payable, the court had to ascertain the substance of the transaction effected by it.
2. The Ramsay principle, within the limits stated by Lord Brightman in Furniss v. Dawson was a judge-made anti-tax avoidance rule which was applicable to stamp duty. That principle required that a composite transaction or series of transactions be treated as a single transaction, achieving the pre-ordained end. Thus the court would disregard those steps which had been inserted for no business purpose other than tax avoidance.
3. In the instant case the transaction should be treated as accomplishing the transfer of the unencumbered freehold interest to the taxpayer at the agreed price. That was the end pre-ordained when the first step (the lease agreement) was taken. Therefore, the lease agreement should be disregarded and the two sale agreements treated as a composite contract for the sale of the property to the taxpayer.
4. The stamp duty payable on the transfer would be assessed in the sum of £1,456.
1. By a transfer dated 16 March 1984 ("the Transfer"), John Derek Simon ("Mr. Simon") transferred to the above named appellant Susan Ingram ("the appellant") the freehold property ("the Property") 11 Gills Hill Lane, Radlett, Herts registered under title HGD 62218. The Transfer was presented for adjudication on 20 March 1984 pursuant to the Stamp Act 1891, Stamp Act 1891 section 12sec. 12 and the above named respondents, the Commissioners of Inland Revenue ("the Commissioners") assessed the duty with which in their opinion the Transfer was chargeable, being the sum of £1,456.00 (namely 1% of £145,600.00).
2. The appellant being dissatisfied with the said assessment and having on 29 September 1984 paid the duty in conformity thereto, appealed to the High Court pursuant to the Stamp Act 1891, Stamp Act 1891 section 13 subsec-or-para (1)sec. 13(1) and required the Commissioners to state and sign a case.
3. It is common ground that the Transfer falls under the heading in theStamp Act 1891, Stamp Act 1891 schedule 1Sch. 1:
CONVEYANCE or TRANSFER on sale, of any property…where…the amount or value of the consideration exceeds £500, the rate of £1 for every £100 or part of £100 of the consideration.
[The reference to the amount or value of the consideration and the rates are those imposed by the Finance Act 1984, Finance Act 1984 section 109sec. 109.]
4. The following are facts and circumstances relating to the Transfer.
(2) The Property was first offered for sale as an unencumbered freehold property with vacant possession. The appellant negotiated a price of £145,500 for its purchase. The documents, copies of which are Exhibits, A, B, C, and D hereto were executed with a view to reducing the amount of stamp duty which would otherwise have been payable if the appellant had acquired the unencumbered freehold title to the Property pursuant to a straightforward conventional contract and transfer.
(3) On 17 February 1984 Mr. Simon and the appellant made the agreement (being an agreement for lease of the Property for a term of 999 years at a premium of £145,000 and an annual rent of £25). A deposit of £14,500 was paid by the appellant on entering into the Agreement. A copy of the counterpart is Exhibit A hereto. The interest thereby created was not protected by entry of a caution or notice on the land register.
(4) On 21 February 1984 Mr. Simon and Hartfield Securities Limited ("the company") made the contract of sale of the Property subject to the terms and provisions of Exhibit A at a price of £500, a copy of the contract for sale is Exhibit B hereto. The company paid a deposit of £50 on entering into the Contract.
(5) On 23 February 1984 the company and the appellant made the agreement for the subsale of the Property at the price of £600. The appellant paid a deposit of £60 on entering into the Agreement. A copy of the counterpart is Exhibit C hereto.
(6) On 16 March 1984 by the Transfer a copy of which is Exhibit D hereto, after reciting Exhibits A, and B and C, and the payments of £145,000 to Mr. Simon and £500 to Mr. Simon and £100 to the company Mr. Simon transferred and the company confirmed to the appellant the Property subject to and with the benefit of the terms and provisions of Exhibit A.
(7) Meanwhile on 17 February 1984 Harvey Philip Ingram the husband of appellant and the appellant and the company and Mr. Simon had entered into the deed.
(8) The company was incorporated on 5 May 1981. Its issued share capital of four £1 ordinary shares was held as to one share each by Stanley Bertram Klarfeld. Harvey Philip Ingram, John Levy and Anthony Ronald Louis Ansell, who were the directors of the company, and were also partners in the firm of solicitors, Kleinman Klarfeld and Co., who acted for the appellant in her acquisition of the Property.
(9) The Partners in the said firm of solicitors gave full information to the...
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