Revenue and Customs Commissioners v Candy
| Jurisdiction | UK Non-devolved |
| Neutral Citation | [2021] UKUT 170 (TCC) |
| Year | 2021 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2021] UKUT 170 (TCC)
Mr Justice Mellor, Judge Andrew Scott
Upper Tribunal (Tax and Chancery Chamber)
Stamp duty land tax (SDLT) – Contract rescinded more than 12 months after substantial performance – Requirement under Finance Act 2003 (FA 2003), s. 44(9) for repayment claim to be made by amendment of return – Whether land-transaction return validly amended after 12-month limit imposed by FA 2003, Sch. 10, para. 6(3) – No – Appeal allowed.
The Upper Tribunal held that the First-Tier Tribunal had been wrong to find that the 12-month time limit for amending a return did not apply in a case when a repayment of tax was claimed following rescission of a contract substantially performed before completion.
On 9 August 2012, the respondent had entered into two agreements for lease in respect of a property in London. Substantial performance of the second agreement took place on 10 August 2012, before its completion. The purchaser filed land-transaction returns and paid the appropriate tax in respect of the completion of the agreement for the first lease and on the substantial performance of the agreement for the second lease. On 1 April 2014, the agreement for the second lease was novated and the purchaser transferred his interests under both leases by way of gift to his brother.
Under FA 2003, s. 44(9), where tax has been paid on the substantial performance of a contract prior to its completion and the contract is to any extent “afterwards rescinded or annulled” or for any other reason not carried into effect, HMRC must, to that extent, repay the tax. It also provides that the repayment may only be claimed by amending the return made in respect of the substantial performance. FA 2003, Sch. 10, para. 6(3) provides that a return may only be amended within 12 months of the filing date, “except as otherwise provided”.
On 10 April 2014, the respondent amended the return in respect of substantial performance of the second lease so as to claim repayment as provided under FA 2003, s. 44(9). HMRC rejected the claim on the grounds that the amendment was out of time.
The respondent's appeal against HMRC's decision was heard and upheld by the First-Tier Tribunal (“FTT”). Essentially, the FTT's reasoning was that the words “except as otherwise provided” in FA 2003, Sch. 10, para. 6(3) had necessarily to refer to a specific provision elsewhere in the legislation, as Parliament would not otherwise have included them, and at the time the legislation was passed, that other provision could only have been the word “afterwards” in FA 2003, s. 44(9). HMRC was given leave to appeal.
According to the Upper Tribunal, the proposition that all words included in a statute must always have a substantive meaning, on which the FTT had apparently reached its conclusion, went too far, as authorities showed. It was not uncommon for Parliament to include provisions in generic terms pointing out that a wide general proposition could be countermanded by other provisions. From an analysis of the use of “except as otherwise provided” elsewhere in the SDLT legislation, there were examples where they did not engage any other provision and where a specific time limit was displaced, there were explicit provisions doing so.
The use of the word “afterwards” in the first sentence of FA 2003, s. 44(9) was there usefully to underline that one event (rescission, annulment etc) followed on from another – the substantial performance of the contract – and had no other purpose. The second sentence in FA 2003, s. 44(9) – “Repayment must be claimed by amendment of the land-transaction return made in respect of the contract” – did two things. First, it provided that the taxpayer had to make a repayment claim, and second, that the claim could only be made by means of an amendment to the original return. Logically, a proposition seeking to displace the time limit thereby set would come after the proposition for the claim to be made that way rather than before it. The UT justified its conclusion by reference to legislative history and the predecessor stamp-duty provisions.
As to the claim that such a construction was unfair and produced economic double taxation, the outcome here was that two different persons (the respondent and his brother) were charged to tax in respect of different periods and different transactions. This was a natural incident of the SDLT regime.
Furthermore, contrary to the view taken by the FTT, the risk that FA 2003, s. 44(9) could be allowed to operate without a time limit was just the sort of risk that Parliament would have wished to avoid in 2003. An avoidance charge (the “resting on contract” device that the section was intended to counteract) that could be unwound without any time limit could have been open to abuse. Moreover, before the seminal judgment of the House of Lords in Barclays Mercantile Business Finance Ltd v Mawson [2004] BTC 414, particularly given the remarks concerning stamp duty made by Lord Hoffmann in McNiven v Westmoreland Investments Ltd [2001] BTC 44, it would not have been unreasonable to believe that provisions such as FA 2003, s. 44(9) might be immune from the Ramsay approach.
In conclusion, the 12-month time limit for amending a return applied to repayment claims made under FA 2003, s. 44(9). The respondent's amendment had been out of time and the appeal by HMRC would be allowed.
The UT's reasoning seems compelling; the FTT's view that the time limit was overruled by the mere appearance of the word “afterwards” in FA 2003, s. 44(9) always seemed an interpretation stretched to breaking point.
Dr Christopher McNall, counsel, instructed by the General Counsel and Solicitor for HM Revenue & Customs, appeared for the appellants
Mr Michael Thomas, counsel, appeared for the respondent
[1] This appeal, brought with the permission of the First-tier Tribunal (Tax Chamber) (the FTT), is about the time-limit that is relevant to the making of a claim for repayment of stamp duty land tax (SDLT) in circumstances where the substantial performance of a contract triggered an initial liability to the tax and the contract concerned was subsequently rescinded or annulled or otherwise not carried into effect.
[2] Section 44 of the Finance Act 2003 (referred to in this decision as “FA 2003” and references to other Finance Acts are abbreviated in the same way) operates to impose a charge to SDLT where substantial performance of a contract takes place prior to completion. In this case, a charge to tax arose at that time. However, under subsection (9) of that section, if the contract “is (to any extent) afterwards rescinded or annulled, or is for any other reason not carried into effect,” the tax must (to that extent) be repaid by HMRC. The repayment must be claimed by amendment of the relevant SDLT return.
[3] Paragraph 6(3) of Sch.10 to FA 2003 imposes a time-limit of 12 months in which an SDLT return can be amended with the time running from the filing date for the return. But, by the opening words of that sub-paragraph, that strict time-limit is subject to an exception if or where another (unspecified) provision has “otherwise provided”.
[4] In this case, the contract was (by way of novation) rescinded or annulled or otherwise not carried into effect after the expiry of the normal 12 month time-limit for amending the return relevant to the original chargeable transaction.
[5] The taxpayer was successful before the FTT in his submission that the terms of s.44(9) of FA 2003 were such that it operated as an exception to the normal 12 month time-limit. The taxpayer was not out of time to amend his return. Indeed, there was no time-limit at all. It is against that decision that HMRC appeal. HMRC's view is that repayment claims authorised by s.44(9) of FA 2003 can only be made by amending returns subject to the normal 12 month time-limit.
[6] The litigation relating to this case is complicated by the fact that the taxpayer has made his claim for repayment of SDLT on two alternative bases. Those separate claims are the subject of separate appeals before the FTT. The decision of the FTT subject to the appeal to this Tribunal was on a single preliminary issue concerned only with the proper construction of s.44(9) of FA 2003 and para.6(3) of Sch.10 to that Act. The other basis on which the taxpayer has sought a repayment of SDLT was by way of a claim for overpayment relief under para. 34 of Sch.10 to FA 2003.
[7] The FTT did not have an agreed set of facts but it expressed its understanding that the description of the underlying property transactions in HMRC's statement of case was not in dispute to any significant extent. The tribunal set out a summary of those facts as so pleaded to set the preliminary issue in context whilst expressly not making any findings of fact.
[8] We consider that the FTT was right to do so, and, as we explain below, some of the submissions made by Mr Thomas in defending the FTT's decision rest on the proposition that economic double taxation would arise if HMRC are right in their view of the law. It is difficult to make any sense of that submission without an understanding of the particular facts relevant to the taxpayer's case.
[9] The FTT set out its summary of the underlying property transactions at [10] to [21] of its decision. The relevant transactions related to a property known at the time as Gordon House, a substantial house in London.
[10] The transactions involved two separate leases. This was so as to secure that the second of the leases did not engage the right for a tenant under a long lease of residential premises to extend the lease or acquire the freehold. The aim was instead for the tenant to contract out of those enfranchisement rights. In essence, an application for a court order was intended to be made to grant the second lease without enfranchisement rights but only after the property had first been developed by the...
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