Upper Tribunal Tax and Chancery Chamber

UT/2023/000063 - [2024] UKUT 00307 (TCC)

Fecha: 28-Jun-2024

Purposive construction

Purposive construction

34.

As with any statutory wording, the words “suitable for use as a dwelling” in section 116 must be construed by reference to the words used, in the context in which they are used, and taking into account the importance of the purpose of the legislation: Rossendale BoroughCouncil v Hurstwood Properties (A) Ltd [2021] UKSC 16 (“Hurstwood”).

35.

In HMRC v Daniel Ridgway [2024] UKUT 36 (TCC) (“Ridgway”) the Upper Tribunal said that in relation to section 116 the purposive approach laid down by the Supreme Court in Hurstwood involves “ascertaining the characteristics of the buildings intended to be covered by the phrase “suitable for use as a dwelling”, and considering whether the [relevant property] falls within that class of buildings”: [32] of Ridgway. We agree with that formulation.

36.

In relation to the purpose of section 116, Mr Firth pointed out that it is not an anti-avoidance provision. We agree with that, so far as it goes; as the Upper Tribunal expressed it in Ridgway, at [37], it is not “an anti-avoidance provision as such”. We endorse the description of the broad purpose of the current legislation given in Henderson, at [16]:

In our view the purpose of the SDLT provisions is to tax transactions relating to residential property at a higher rate than non-residential property, and for transactions in relation to residential property by developers and second homeowners to be taxed more highly than a dwelling in which people live as their primary home. It is therefore right to construe the phrase “suitable for use as a … dwelling” by reference to that statutory purpose.

37.

Mr Ripley took us to various extra-statutory materials which, he said, indicated that Mr Firth’s suggested interpretation of section 116 could not have been intended by Parliament. These related to the pre-SDLT definition of residential property contained in the stamp duty provisions granting relief for certain properties in “disadvantaged areas”. The definition of residential property in those provisions (contained in section 92B Finance Act 2002) was materially similar to section 116. When the Finance Bill 2002 was being debated in Standing Committee, Dawn Primarolo, then Paymaster General, stated as follows:

It may help the Committee's understanding still further if I explain why we thought it necessary to include a ''building . . . suitable for use as a dwelling'' as well as a building used as a dwelling within the definition of residential property. Quite simply, the intention is to ensure that existing dwellings that are unoccupied when sold or that are dilapidated or even semi-derelict are within the definition of residential property. For example, in London in recent years, a number of former squats have been sold by local councils and have been in a poor state of repair. It is not my intention to exempt such properties from stamp duty if they exceed the £150,000 limit. They are fundamentally the shell of a desirable home, and that is reflected in the purchase price…A less extreme example is the need to ensure that a vendor could not remove a bathroom suite from an otherwise perfectly kitted-out home to help the purchaser secure a stamp duty saving…

38.

Mr Ripley also referred to other background material, including HMRC Statements of Practice. These remained relevant, he said, because FA 2003, which introduced SDLT, used materially the same definition of “residential property”.

39.

Mr Firth argued that these materials could not be relied on by HMRC, citing Hyman v HMRC [2022] EWCA Civ 185 (“Hyman”). He said that they were in any event irrelevant, and/or failed to support HMRC’s interpretation.

40.

We have not found the extra-statutory materials referred to by Mr Ripley to be of any material assistance in construing the phrase “suitable for use as a dwelling” in section 116. In Hyman, the Court of Appeal emphasised that SDLT is a different tax to stamp duty, so that extra-statutory materials relating to the latter cannot be simply read across to SDLT. Some of the materials referred to by Mr Ripley, such as the Statements of Practice, are in any event only evidence of HMRC’s understanding or intentions. Mr Firth argued that the statement from Ms Primarolo was also inadmissible because it did not satisfy the tests in Pepper v Hart (Footnote: ²), but since it relates to stamp duty we prefer, in any event, to place no reliance on it in reaching our conclusion.