Upper Tribunal Tax and Chancery Chamber

UT (Tax & Chancery) UT/2022/0092 - [2024] UKUT 00373 (TCC)

Fecha: 29-May-2024

Ground 2 – whether the Case 3 exception to the deemed market value rule applies

Ground 2 – whether the Case 3 exception to the deemed market value rule applies

114.

Tower One submitted that the FTT erred in law in concluding that Tower One was liable to SDLT on the market value of the Tower Lease (£200m) rather than the consideration paid to acquire the Tower Lease (approximately £30m).

115.

It was common ground that the Transaction was within s53(1), on the basis that Tower One is a company and it is connected with B64, which is “the vendor” for this purpose. Where this section applies, the chargeable consideration for the transaction is taken to be not less than the market value of the subject-matter of the transaction as at the effective date of the transaction (s53(1A)).

116.

Section 54 then sets out the situations where s53 does not apply. Tower One relied on the Case 3 Exception in s54(4). The vendor referred to in this exception is B64, and it was common ground that the transfer of the Tower Lease by B64 to Tower One at book value was, or was part of, a distribution of the assets of B64 within s54(4)(a). The only issue was whether the requirement in s54(4)(b) was met, namely:

“(b)
it is not the case that –
(i)
the subject-matter of the transaction, or
(ii)
an interest from which that interest is derived,
has, within the period of three years immediately preceding the effective date of the transaction, been the subject of a transaction in respect of which group relief was claimed by the vendor.”

117.

The FTT held that the Case 3 Exception did not apply because earlier in the day on 5 July 2011, before the Transaction, the Tower Lease had been granted to B64 and B64 submitted a SDLT1 in which it made a group relief claim (although there was no finding in relation to the timing of the making of that claim). Thus, the FTT held, at the time of the transfer of the Tower Lease by B64 to Tower One, the Tower Lease had been subject to an earlier transaction in which a group relief claim had been made ([90(3)]). The FTT found it was immaterial that:

(1)

the earlier transaction had taken place on the same day. That was because although the legislation referred to “the period of three years immediately preceding the effective date” that requirement is satisfied whenever the previous transaction takes place at some earlier point in time, even if the first transaction precedes the second by only minutes or seconds. The FTT said that although the legislation speaks of an “effective date of the transaction” rather than of an “effective time of the transaction”, all transactions in fact take place at a specific point in time (at [71]); and

(2)

HMRC had concluded that the group relief claim in the SDLT1 filed by B64 did not need to be considered because they considered sub-sale relief to be available. This was because what matters is whether a group relief claim has been made, not whether B64 was entitled (or whether HMRC considered it to be entitled) to group relief.

118.

The parties’ submissions are summarised below. After the hearing, at our invitation, both parties provided further written submissions on this ground by reference to the decision of the Supreme Court in Hurstwood Properties (A) Ltd and others v Rossendale Borough Council and another [2021] UKSC 16 (“Rossendale”) for which we are grateful.