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

All statutory references below are to the Finance Act 2003 (“FA 2003”).

FA 2003 imposes a charge to SDLT on the acquisition of a “chargeable interest”, which includes an estate in land in England or Northern Ireland. The amount of tax chargeable is set out in section 55. Section 55(1) provides that:

In this case, the relevant subsection is section 55(1B). This refers to Table A and Table B, which prescribe the rates of SDLT to be used. Table A is the appropriate table “if the relevant land consists entirely of residential property” and Table B is the appropriate table “if the relevant land consists of or includes land that is not residential property.” The rates are higher in Table A than Table B.

For these purposes, section 55(3)(a) defines the relevant land as “the land an interest in which is the main subject-matter of the transaction”. Section 43(6) provides that references to “the subject-matter of a land transaction” in this part of the legislation are to “the chargeable interest acquired (the ‘main subject matter’), together with any interest or right appurtenant or pertaining to it that is acquired with it.”

Section 116(1)(a) relevantly defines “residential property” as follows:

The “effective date” of a chargeable transaction is an important concept in determining a taxpayer’s obligations to file returns for SDLT purposes and the date on which SDLT must be paid. For the purposes of the land transaction in this appeal, the “effective date” of the land transaction means the date of completion of the purchase of the Property: section 44(3) and section 119(1).

Schedule 4ZA provides for higher rates of SDLT to be chargeable in respect of purchases of dwellings in certain specified situations. The definition of “dwelling” for this purpose (in paragraph 18 of Schedule 4ZA) is as follows:

The paragraph 18 definition is in the same terms as the definition of “residential property” in section 116(1)(a), save that it applies to a “single” dwelling.

As the FTT recognised (at [8]-[9] of the Decision), since it was agreed that, if it were a dwelling, the Property would be a single dwelling, there was no meaningful difference for the purposes of the appeal between the two definitions, so it made no difference, said the FTT, that the correspondence with HMRC and the closure notice referred to section 116(1)(a) rather than paragraph 18 of Schedule 4ZA.

The FTT identified the issue to be determined as whether, on the effective date (the date of completion in this case), the Property was (as HMRC said) “suitable for use as a single dwelling” within paragraph 18(2) of Schedule 4ZA.

Although the transaction under appeal was potentially liable to SDLT under Schedule 4ZA as a “higher rates” transaction, it is section 116 which determines whether Table A or Table B applies, and in this decision we refer to the definition in section 116.