UT (Tax & Chancery) UT-2024-000024 - [2025] UKUT 00156 (TCC)

The Appellants appeal the decision of the First-tier Tribunal (“FTT”) dated 15 December 2023 dismissing their appeals: [2023] UKFTT 1044 (TC) (“the Decision”). The appeal concerns the procedural requirements for valid enquiry notices and discovery assessments in relation to Stamp Duty Land Tax (“SDLT”).

The Appellants are three pairs of unconnected taxpayers and their appeals are lead cases. The background to the appeals involves marketed SDLT avoidance arrangements implemented by a number of taxpayers, including the Appellants, in relation to the acquisition of residential properties in 2010 and 2011 (“the Arrangements”).

It was accepted by the Appellants prior to the hearing of the FTT appeal that the Arrangements failed to achieve their objective of avoiding SDLT on the relevant acquisitions. Nonetheless, among other issues considered, there were two procedural issues contested before the FTT as to whether HMRC had taken the necessary steps to impose liability on the Appellants by:

The Arrangements implemented by the Appellants were intended to replicate the transactions ultimately considered in Project Blue Limited v HM Revenue & Customs [2018] UKSC 30. The transactions were described by the FTT at [9]:

We describe the intended tax analysis below. Briefly, the Appellants made two land transaction returns for SDLT and Vale also made a land transaction return. The FTT described these as Returns A, B and C. Return A was filed by the Appellants and related to the Appellants’ purchase of the freehold from the vendor. Return B was filed by Vale and related to its acquisition of the freehold from the Appellants by way of sub-sale. Return C was filed by the Appellants and related to the Appellants’ acquisition of the lease. Return A included a claim for sub-sale relief under s45(3) FA 2003 and showed no SDLT due. Return B claimed alternative finance relief under s71A FA 2003 and showed no SDLT due. Return C also claimed alternative finance relief and showed no SDLT due.

The effect of the judgment of the Supreme Court in Project Blue however, was that SDLT was due on a notional transaction effecting a purchase of the property by the Appellants from the vendor on which SDLT was due pursuant to the anti-avoidance provision in s75A FA 2003.

In relation to issue (1), the FTT upheld the enquiry notices, and the corresponding closure notices, issued to the Appellants by HMRC. It decided that HMRC had lawfully opened enquiries in relation to Return A and Return C by giving notice to the Appellants in letters dated 8 June 2011. The FTT held that the terms of the letters from HMRC to the Appellants and their agents were sufficient to satisfy the requirement in paragraph 12 Schedule 10 FA 2003 to give a valid notice of an enquiry into each return because a reasonable taxpayer would have been informed of the intention of HMRC to enquire into both returns. We set out the FTT’s discussion of the issue in more detail below.

In relation to issue (2), HMRC relied on the 20 year extended time limit for making a discovery assessment in paragraph 31(2A)(b) Schedule 10 FA 2003 which applies where the taxpayer has failed to make a return. It is HMRC’s case that the Appellants failed to make a return in relation to the notional transaction pursuant to s75A. The FTT found that the protective discovery assessments were out of time as the extended time period did not apply. It found that Return A met the requirements of a return for the notional transaction under s75A FA 2003 and there had been no failure to file a return.

The Appellants now appeal to the Upper Tribunal (“UT”) against the Decision in relation to the validity of the enquiry notices and hence the closure notices issued by HMRC. The Appellants have been granted permission to appeal on two grounds:

In HMRC’s Response, in addition to opposing the Appellants’ grounds, HMRC seek to uphold the FTT’s decision on an alternative ground. They say that the intended effect of the relevant notices of enquiry was reasonably ascertainable by the persons to whom they were directed and therefore, applying s83(2) FA 2003, they were not ineffective.

In addition, HMRC cross-appeal to the UT on a protective basis against the FTT’s decision that the assessments were made out of time. They submit that the FTT erred in law in holding that Return A satisfied the requirement to file a return in relation to the notional land transaction under s75A. Therefore, HMRC argue that the FTT erred in finding that the extended time limit in which to make the assessment pursuant to paragraph 31(2A)(b) did not apply.

The FTT granted the Appellants permission to appeal in the appeals and HMRC permission to make the cross-appeal. At the time of the FTT proceedings there were approximately 400 similar cases (and there remain over 300), waiting behind the present appeals, all of which are affected by the issues addressed in this appeal.

We are very grateful to Mr Chacko who appeared for the Appellants and Mr Elliott who appeared for HMRC for their helpful written and oral submissions, all of which we have considered.

For the purposes of this decision: