UT-2023-000116; - [2025] UKUT 00164 (TCC)

The dispute concerned what was the “chargeable consideration” given for the care home properties: FTT [146]. This depended on a “just and reasonable” apportionment between the land and the other assets in accordance with paragraph 4 of Schedule 4 to the Finance Act 2003.

Nellsar argued that, on the basis of the decision of the House of Lords in Leedale v Lewis [1982] STC 169, there was “a wide latitude in judgment” conferred on Nellsar when making its apportionment. Accordingly, the FTT should not interfere with the figures which it originally advanced. Nellsar also argued that the RICS guidance notes specifically stated that “apportionments for tax purposes have to be in accordance with specific legislation and are outside the scope of this guidance note”.

HMRC’s submission was that the following five steps, taken from a 2013 Practice Note (“the 2013 Practice Note”) published by HMRC, should be followed to arrive at the necessary “just and reasonable” apportionment: FTT [183] and [149]. These were:

HMRC also submitted that the key ingredients in that process were the property value and any goodwill value; the goodwill value was what was left after deducting all the tangible asset values from the purchase price: FTT [184]. There was, according to HMRC, no place for a DRC figure to be included in relation to the property, as it would have no relationship with market value FTT [184]. Therefore, in a situation where the value of the loose chattels was not subject to any material dispute, the making of an appropriate apportionment depended almost entirely on the market value of the property; that took one back to the same arguments as were relevant for corporation tax purposes FTT [184].

The FTT accepted HMRC’s submissions as to the appropriate method for the “just and reasonable” apportionment: FTT [222] and [223]. Leedale v Lewis concerned a very different legal and factual context which did not provide much assistance in the present case. In particular, that was because HMRC’s method (as set out in the 2013 Practice Note) was “anchored in the independent market values of the separate assets acquired (which DRC obviously was not): FTT [223]. Having held that the relevant apportionments for SDLT purposes were to be carried out following the five-step approach proposed by HMRC (based on HMRC’s 2013 Practice Note), the FTT added that the market values of the relevant assets were to be calculated in the same way as for the corporation tax issues FTT [228].