Redmount Trust Company Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 24 November 2021 |
| Neutral Citation | [2022] UKFTT 38 (TC) |
| Court | First Tier Tribunal (Tax Chamber) |
[2022] UKFTT 38 (TC)
Judge Heidi Poon
Stamp duty land tax – Sub-sale relief – FA2003, s. 45(3) – Retrospective amendment to s. 45(1A) by FA 2013, s. 194 – Whether the scheme effective pre-amendment for the original contract to be disregarded to render the return voluntary – Whether valid enquiry opened – Whether the closure notice invalid consequent on a return being voluntary – Whether closure notice in any event subject to a four-year time limit – FA 2003, s. 75A anti-avoidance provisions – Whether discovery assessment valid and within the time limit – Appeals dismissed.
[1] Redmount Trust Company Ltd (“the appellant”) implemented a “subsale relief” scheme which was blocked by retrospective amendments by virtue of s 194 Finance Act 2013. The matters in the conjoined appeals subsequently brought by the appellant are the following:
- Appeal TC/2017/02759 is against the closure notice issued by the respondents (HMRC) on 7 September 2016 on the basis that £294,000 SDLT was due (the Closure Notice appeal);
- Appeal TC/2019/01306 is against the discovery assessment issued by HMRC on 25 September 2018 (the Discovery Assessment appeal).
[2] On 12 December 2016, the appellant wrote to HMRC to request a review of the closure notice decision issued on 7 September 2016, which was upheld on review by letter dated 27 February 2017. The appellant notified its appeal against the closure notice on 29 March 2017.
[3] On 29 January 2018, the appellant filed its skeleton argument by former counsel. However, the appellant soon changed its counsel to Mr Mullan, and then filed a “Replacement Skeleton Argument” by Mr Mullan on 1 February 2018, which introduced a new ground of appeal that the closure notice was invalid because it was founded on a “voluntary” return: (“the voluntary return argument”).
[4] On 7 February 2018, the Tribunal granted an adjournment of the hearing in the Closure Notice appeal, and then a stay on 13 April 2018.
[5] By letter dated 25 September 2018, HMRC issued a discovery assessment as an alternative to the closure notice, and in the event that the appellant succeeded in the Closure Notice appeal.
[6] The appellant appealed the discovery assessment and requested a review on 23 November 2018. The review officer upheld the discovery assessment by letter dated 1 February 2019. The appellant notified its appeal against the discovery assessment by notice dated 1 March 2019.
[7] The closure notice and discovery assessment relate to the same underlying transactions. It is not contended by the appellant that as a result of the retrospective amendment to s 45(3) FA 2003 introduced by FA 2013, those transactions give rise to a charge to SDLT. The appeals are not staked on substantive grounds as concerns the chargeability of SDLT, but on procedural grounds that neither of the assessments has been validly issued.
[8] In relation to the Closure Notice appeal, the issues arise for determination are:
- Whether the closure notice is invalid because the appellant's SDLT return is voluntary, as said by the appellant;
- Whether the closure notice is subject to the same time limits as discovery assessments, and whether as a result of those time limits, it has been issued out of time.
[9] In relation to the Discovery Assessment appeal, the issues arise are:
- Whether the discovery assessment is invalid because it was raised outside the normal 4-year time limit; in particular, whether the 20-year time limit in para 31(2A) of Sch 10 to FA 2003 applies because there has been non-compliance with s 76(1) FA 2003.
- Whether the discovery assessment is invalid due to its being stale.
[10] The parties have produced a joint bundle of documents in four PDF files designated as Bundle A, B, C, and D. The appellant would appear to have had Counsel's Opinion on the Scheme, as per its letter dated 11 March 2013 in reply to HMRC's enquiry wherein the appellant stated that the “documents in relation to which legal professional privilege is asserted include communications and written advice with Counsel and Solicitors, including Counsel's Opinion”. The documents produced by the appellant are understood to be those that are not subject to legal professional privilege.
[11] A Statement of Agreed Facts dated 4 December 2017 was lodged before the appellant changed counsel in February 2018. Subsequently, HMRC also changed counsel to Ms Wilson, who has made one qualification to para 11 of the Statement, which is set out in the footnote in the appended Statement as Annex 1.
[12] The first diet of hearing was taken up by hearing counsel's submissions for the respective parties in relation to the Closure Notice appeal; neither party led any witness evidence.
[13] The second diet was taken up by hearing the Discovery Assessment appeal, with Officer Christopher Barlow appearing as a witness for HMRC. Officer Barlow has worked for HMRC and formerly Inland Revenue since 1985. He joined the SDLT channel in the Counter Avoidance Directorate in 2017, and has been the Delivery Lead for the SDLT channel. He has the responsibility for overseeing the investigation of SDLT returns where it is believed that an avoidance scheme has been used by the property purchasers, and for ensuring appeals are progressed to a Tribunal hearing where appropriate. I find Officer Barlow to be credible and reliable, and accept his evidence as to matters of fact.
[14] Sections 44 and 45 FA 2003, before and after amendment by s 194 FA 2013, are relevant to the issues in these appeals. In summary:
- Section 44 applies where a contract for a land transaction is to be completed by conveyance, with sub-ss 44(3), (4) and (5) being provisions for determining the effective date of substantial performance or completion of a land transaction.
- Section 44(5) provides that a contract is substantially performed when the purchaser takes possession of the subject matter of the contract, or a substantial amount of the consideration is paid.
- Section 45 modifies the operation of s 44, and s 45(1) applies where –(1)a contract for a land transaction (the original contract) is entered into under which the transaction is to be completed by a conveyance', …there is an assignment, subsale or other transaction (relating to the whole or part of the subject-matter of the original contract) as a result of which a person other than the original purchaser becomes entitled to call for a conveyance to him, …
- Section 45(1A) before the amendment provided as follows:(1A) The reference in subsection (1)(b) to an assignment, subsale or other transaction does not include the grant or assignment of an option , …
- Section 45(1A) after the amendment includes the insertion in bold as follows:(1A) The reference in subsection (1)(b) to an assignment, subsale or other transaction does not include the grant or assignment of an option, [or an agreement for the future grant or assignment of an option].
- Section 45(2) provides that s 44 is to have effect in accordance with the provisions set out in section 45.
- Section 45(3) applies as if there were a contract for a land transaction (a secondary contract) when certain conditions are met. The statutory wording of as if and the subjunctive there were indicate the statutory deeming pertaining to the secondary contract. The tailpiece of s 45(3) provides for the relief in terms as follows:The substantial performance or completion of the original contract at the same time as, and in connection with, the substantial performance or completion of the secondary contract shall be disregarded except in a case where the secondary contract gives rise to a transaction that is exempt from charge by virtue of any of sections 71A to 73 (which relate to alternative property finance).
[15] Section 194 FA 2013 applies retrospectively to transactions entered into on or after 21 March 2012 to give effect to the amendment made to s 45(1A) under s 194(2), so that s 45(3) relief shall not apply to “an agreement for the future grant or assignment of an option”. The relevant parts of s 194 are as follows.
(1) Section 45 of FA 2003 (contract and conveyance: effect of transfer of rights) –
- has effect subject to the amendment in subsection (2) below in relation to agreements for the grant or assignment of an option that are entered into during the period beginning with 21 March 2021 and ending immediately before the day on which this Act is passed, …[ … ]
(2) At the end of subsection (1A) insert “or an agreement for the future grant or assignment of an option”. (italics added)
[ … ]
(8) Subsections (10) to (12) apply where –
- as a result of subsection (2) of this section, section 45 of FA 2003 does not apply in relation to a contract of the kind mentioned in subsection (1)(a) of that section (the original contract),[ … ]
(10) Section 76 of FA 2003 (duty to deliver land transaction return) is to be regarded as requiring the purchaser under the original contract to deliver a land transaction return relating to the land transaction not later than 30 September 2013.
(11) Accordingly, 30 September 2013 is for the purposes of Part 4 of FA 2003 the filing date for the land transaction return relating to the transaction.
(12) If the purchaser under the original contract (“P”) has delivered a land transaction return relating to the land transaction before the day on which this Act is passed, P must not later than 30 September 2013 give notice under paragraph 6 of Schedule 10 to FA 2003 amending the return, but this does not prevent P from making subsequent amendments within the time allowed by sub-paragraph (3) of that paragraph.
[16] Sections 76–78 and Schedule 10 to FA 2003 are provisions governing the returns, enquiries, assessments and appeals relating to SDLT, whereby:
- Para 1 of Sch 10 provides that a land transaction return must be...
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