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

The Supreme Court handed down judgment in Project Blue on 13 June 2018. It held that the transactions in that case gave rise to liability to SDLT under section 75A FA 2003. The interaction between s45 and s71A meant that no SDLT charges arose on either the original purchaser or the finance institution, but that there was a charge on the original purchaser by virtue of s 75A FA 2003. The Supreme Court held that this charge could be levied by way of amendment to the taxpayer's SDLT return, being the equivalent of Return A.

On 24 May 2022, the Appellants amended their grounds of appeal to withdraw all arguments relating to liability and instead argued that HMRC had failed to open valid enquiries into the relevant returns because the notices of enquiry did not clearly state which land transaction returns HMRC were intending to enquire into. The Appellants also challenged the validity of the assessments.

References in square brackets [] are to paragraph numbers in the Decision unless the context otherwise requires.

The factual and procedural background to the appeals is set out in the Decision at [8]-[11] and [19]-[62]. The FTT’s findings were made by reference to the transactions undertaken by Mr and Mrs Rakshit, who were the first appellants before the FTT but have not appealed to the UT. The present parties have continued to refer to the documentation of Mr and Mrs Rakshit for the sake of clarity and we shall do the same. We were told that the documentation is identical in substance for each Appellant.

The Appellants appointed ELS International Lawyers LLP (“ELS”) as their agent. ELS sent a letter to HMRC dated 7 September 2010 headed “Acquisition of Land at 14a Tangier Road, Guildford, Surrey, GU1 2DE”. It summarised their analysis as to why no SDLT liability arose on the transactions. In particular, due to the application of s45(3) and s71A, and the fact that s75A did not apply (see [25]). ELS stated that s75A did not apply “because the transaction between [the Appellants and the vendor] was not ‘involved in connection with’ the Alternative Property Finance mentioned above but was a separate standalone transaction. As such, in our submission, it is not a scheme transaction”. The letter concluded “We look forward to hearing from you”.

Three land transaction returns, Returns A, B and C were filed by ELS on 7 September 2010 (see [26]):

“Return A” – A land transaction return was filed on behalf of the Appellants in respect of their acquisition of the property from the original vendor on 2 September 2010, claiming sub-sale relief by entering code 28 “other relief” in box 9 of the return. No SDLT was self-assessed in relation to that transaction.

“Return B” – A land transaction return was filed on behalf of Vale in respect of its acquisition of the property from the Appellants on 2 September 2010, claiming relief by entering code 24 (“alternative property finance”) in box 9 of the return. No SDLT was self-assessed in relation to that transaction.

“Return C” – A further land transaction return was filed on behalf of the Appellants in respect of the acquisition of an interest under the terms of the 999-year lease on 2 September 2010, claiming relief by entering code 24 (“alternative property finance”) in box 9 of the return. No SDLT was self-assessed in relation to that transaction.

Overall, no SDLT was self-assessed as being due as a result of the transactions. No separate land transaction return was filed in relation to the notional transaction under section 75A.

Within the time limit for opening an enquiry, HMRC wrote to the Appellants and to ELS enclosing the following two letters, both for the Appellants and for ELS (see [27] and [28]:

At [31] – [44], the FTT described the correspondence between the ELS and HMRC between 2013 and 2017. On 21 April 2017, HMRC issued the following documents to the Appellants (see [45]-[46]):