UT (Tax & Chancery) UT/2024/000092 - [2025] UKUT 00331 (TCC)

This is an appeal against a decision of the First-tier Tribunal (Tax Chamber) (“the FTT”) released on 18 March 2024. It concerns the Appellant’s liabilities to stamp duty land tax (“SDLT”) at the higher rate for high-value residential transactions and to the annual tax on enveloped dwellings (“ATED”). The FTT held that the Appellant was liable to both, and confirmed an assessment to SDLT in the sum of £372,000 and assessments to ATED for periods ending 31 March 2015, 2018 and 2020 totalling £46,539.

The charge to a higher rate of SDLT pursuant to Schedule 4A Finance Act 2003 (“FA 2003”) applies to high-value residential transactions in certain circumstances, including where the purchaser is a company. There is a relief from the charge where the subject-matter of the transaction consists of certain interests that are acquired exclusively for the purpose of development or redevelopment and resale in the course of a property development trade.

ATED pursuant to Part 3 Finance Act 2013 (“FA 2013”) applies to certain interests in dwellings owned by various entities including companies. As its name implies, it is an annual tax on the taxable value of the interest in annual chargeable periods beginning 1 April. ATED is charged by reference to the number of days in the chargeable period on which certain conditions are satisfied. There is a relief from ATED where certain conditions are satisfied. In particular, a day in a chargeable period is relievable if on that day the person entitled to the interest is carrying on a property development trade and the interest is held exclusively for the purpose of developing and reselling the land in the course of that trade.

The Appellant acquired an option (“the Option”) to purchase a residential property in St John’s Wood, London (“the Property”) on 27 March 2014 for a purchase price of £9,300,000 (“the Option Agreement”). The consideration for the grant of the Option was £4,650,000 (“the Option Sum”) which was to be treated as part of the purchase price if the Option was exercised. The Option was exercised on 26 June 2019. A decision was then taken to sell the Property rather than develop it and it was sold for approximately £6,900,000.

The FTT found that the Appellant carried on a property development trade at all material times and intended to develop the Property on a commercial basis. However, the FTT went on to find that this was not the exclusive purpose for which it acquired and held the Option. In the circumstances, the Appellant was liable to SDLT at the higher rate and to ATED.

The issues on this appeal concern whether the FTT erred in law in its approach to whether the Appellant had acquired the Option interest and continued to hold the Option interest exclusively for the purpose of development in the course of its property development trade.

All references to statutory provisions are to the SDLT provisions in force at the time the Appellant acquired the Option and to the ATED provisions in force during the relevant chargeable periods.