Procedure Cases

(Case Law)

Comment: Key procedural cases have set significant precedents in tax law

Key Points

  • Reservation agreements do not alter SDLT rates.
  • Ignorance of filing requirements is not a valid excuse for late submissions.
  • Procedural issues alone cannot justify SDLT challenges.
  • Companies must ensure accuracy in SDLT returns to avoid penalties.
  • Lack of funds is not a valid excuse for late LTT payments.
  • Timely and accurate claims for SDLT reliefs are crucial.

Main Principles

  • Legal clarity in SDLT rules.
  • Strict adherence to filing and payment deadlines.
  • Taxpayer responsibility for understanding and complying with tax laws.
  • Limited scope for procedural excuses in tax disputes.
  • Importance of timely and accurate tax relief claims.

Introduction to Procedural Cases in First Tier Tax Tribunals

This section of the book aims to shed light on various landmark cases that have shaped the procedural landscape of tax tribunals. From the intricacies of filing appeals to the subtleties of presenting evidence, the procedural aspects of these cases play an important role in determining outcomes. 

Through a detailed examination of selected cases, we will explore how procedural rules and practices have evolved and how they impact the resolution of tax disputes.

Procedure Case: Classification of Reservation Agreements and Linked Transactions

(Case Law>Procedure Cases)

Landmaster Investment Ltd & Anor v Revenue And Customs (STAMP DUTY LAND TAX – Options and rights of pre-emption) [2023] UKFTT 736 (TC) (03 August 2023). Cite as: [2023] UKFTT 736 (TC). 

URL: http://www.bailii.org/uk/cases/UKFTT/TC/2023/TC08919.html 

Reservation agreements for new-build apartments do not change the Stamp Duty Land Tax rate, as they are not considered options or rights of pre-emption.

Introduction
This case revolves around whether reservation agreements for new-build apartments constitute options or rights of pre-emption for Stamp Duty Land Tax (SDLT) purposes.

Example scenario where this case law principle is relevant
In real estate transactions involving new-build properties, buyers often enter into reservation agreements, paying a fee to secure the option to purchase. This case examines if such agreements affect the SDLT rate applicable to the subsequent property purchase.

The legal principles agreed upon
The tribunal determined that reservation agreements in question did not constitute options or rights of pre-emption under the Finance Act 2003. Consequently, these agreements did not alter the SDLT rate, which remained at the residential rate rather than the mixed or non-residential rate.

General summary
The case involved two appeals where potential purchasers entered into reservation agreements with developers, paying a fee to reserve specific new-build apartments. The appellants argued these agreements were options or rights of pre-emption, suggesting the SDLT should be calculated at a mixed rate, potentially lowering their tax liability. 

The tribunal found that the agreements did not grant unilateral rights to purchase the properties but were merely agreements not to negotiate with other buyers for a period. Since these did not qualify as options or rights of pre-emption, the original SDLT returns, calculated at the residential rate, were correct. 

This decision underscores the importance of the legal nature of reservation agreements and their impact on SDLT calculations in real estate transactions involving new-build properties.

Procedure Case: Ignorance of Filing Requirements Not Accepted as Excuse for Late Submission of SDLT

(Case Law>Procedure Cases)

ALASTAIR FERGUSON v Revenue & Customs (STAMP DUTY LAND TAX – penalty for late filing of a Land Transaction return) [2022] UKFTT 84 (TC) (02 March 2022). Cite as: [2022] UKFTT 84 (TC).

URL: http://www.bailii.org/uk/cases/UKFTT/TC/2022/TC08415.html 

Not knowing about the need to file a Stamp Duty Land Tax return is not a valid excuse for submitting it late, and penalties for late filing will apply.

Introduction
Alastair Ferguson faced a £200 penalty and interest charges from HM Revenue & Customs (HMRC) for late filing of a Stamp Duty Land Tax (SDLT) return.

Example scenario where this case law principle is relevant
A property buyer, unaware of the need to file an SDLT return, sends the tax payment to the wrong department and files the return late while waiting for the refund. The tribunal would likely uphold a penalty for late filing, emphasising the importance of understanding and complying with tax filing requirements.

The legal principles agreed upon
The tribunal confirmed that ignorance of filing requirements does not constitute a reasonable excuse for late submission. It also highlighted that penalties for late filing are enforceable even if the delay was due to waiting for a refund from an incorrect payment.

General summary
Alastair Ferguson purchased a property and mistakenly believed no SDLT was due. He sent the SDLT payment to the Land Registry instead of HMRC and filed the SDLT return late, awaiting the refund. 

Ferguson argued that he was unaware of the filing requirement and that he had a reasonable excuse for the delay. The tribunal found that lack of awareness did not constitute a reasonable excuse and that Ferguson had sufficient funds to pay the SDLT without waiting for the refund. 

Consequently, the tribunal upheld the £200 penalty, emphasising the taxpayer’s responsibility to understand and comply with tax obligations. The appeal against the interest charge was struck out due to lack of jurisdiction, reaffirming the importance of timely compliance with tax filing and payment requirements.

 

Procedure Case: Procedural Issues Not Grounds for SDLT Challenge

(Case Law>Procedure Cases)

EBRAHIM v Revenue & Customs (STAMP DUTY LAND TAX – application to strike out – procedural validity of a Revenue determination) [2022] UKFTT 96 (TC) (11 March 2022). Cite as: [2022] UKFTT 96 (TC).

URL: http://www.bailii.org/uk/cases/UKFTT/TC/2022/TC08426.html 

➤ Appeals based on procedural issues with Stamp Duty Land Tax determinations are not valid reasons for challenge in the Tribunal, which focuses on specific statutory grounds for appeals.

Introduction
A case involving Mrs. Ebrahim’s appeal against additional stamp duty land tax (SDLT) determinations was struck out by the First-tier Tribunal.

Example scenario where this case law principle is relevant
In real estate transactions involving complex ownership transfers, this case highlights the Tribunal’s inability to entertain appeals based on procedural validity or receipt of Revenue determinations, emphasising the importance of timely SDLT return submissions.

The legal principles agreed upon
The Tribunal confirmed it lacks jurisdiction to hear appeals against SDLT determinations if they don’t fall within specific statutory grounds, such as disputing the occurrence of the transaction or its notifiability. It also reinforced that procedural irregularities or the non-receipt of determinations do not constitute valid grounds for appeal.

General summary
The case centred on Mrs. Ebrahim’s appeal against SDLT determinations related to the purchase of a residential property, involving complex transactions with her husband and a company they controlled. 

Mrs. Ebrahim argued that HMRC failed to properly serve an enquiry notice, impacting the validity of the SDLT determinations. HMRC moved to strike out the appeal, asserting the Tribunal’s lack of jurisdiction over procedural validity issues and the appellant’s failure to meet the specific grounds for appeal as mandated by law. The Tribunal agreed with HMRC, highlighting that its jurisdiction is strictly confined to the grounds specified in the Finance Act 2003 and that procedural irregularities do not constitute valid grounds for appeal

Consequently, the appeal was struck out, reinforcing the principle that the Tribunal’s role is not to oversee procedural compliance by HMRC but to adjudicate on disputes within the narrow confines of statutory provisions. This decision underscores the importance of understanding the specific legal grounds on which tax appeals can be made and the limitations of the Tribunal’s jurisdiction in tax disputes.

Procedure Case: Company Did Not Take Reasonable Care Submitting SDLT Return

(Case Law>Procedure Cases)

➤ A company was penalised for not carefully checking its Stamp Duty Land Tax return, leading to a costly mistake due to incorrect tax relief claims.

MAS Fabrics Hong Kong Ltd v Revenue and Customs (Stamp Duty Land Tax – property bought by international company) [2021] UKFTT 116 (TC) (20 April 2021). Cite as: [2021] UKFTT 116 (TC).

URL: http://www.bailii.org/uk/cases/UKFTT/TC/2021/TC08097.html 

Introduction
An international company, MAS Fabrics Hong Kong Limited, faced a penalty from HMRC for underpaying Stamp Duty Land Tax (SDLT) due to an inaccurate tax return.

Example scenario where this case law principle is relevant
A foreign company purchases a property in the UK, relying on legal advice for SDLT calculations. If the property is used by non-qualifying individuals, leading to an underpayment of SDLT, and the company fails to provide satisfactory evidence of taking reasonable care in its tax return, it could face penalties similar to MAS Fabrics.

The legal principles agreed upon
The tribunal found that the company did not take reasonable care in submitting its SDLT return, as it did not fully inform or verify the information with its solicitors regarding the property’s occupants, leading to an incorrect claim of relief and underpayment of tax.

General summary
MAS Fabrics Hong Kong Limited was penalised for carelessly underpaying SDLT by £284,000 due to claiming a lower tax rate without proper eligibility. The company’s appeal against the penalty was dismissed, emphasising the importance of providing accurate and complete information to legal advisors and actively verifying tax return details. 

The case underscores the responsibility of international companies to understand and comply with UK tax laws, including the specific conditions under which tax reliefs apply, to avoid penalties for inaccuracies in tax documents.

 

WRA Procedure Case: Lack of Funds Not Valid Excuse for Late LTT Payment

(Case Law>Procedure Cases)

Prime Aesthetics Ltd v The Welsh Revenue Authority (Land Transaction Tax – Penalty for failure to pay LTT on purchase of hotel) [2020] UKFTT 474 (TC) (24 November 2020). Cite as: [2021] STI 81, [2020] UKFTT 474 (TC), [2020] STI 81

URL: https://www.bailii.org/uk/cases/UKFTT/TC/2020/TC07948.html 

➤ Not having enough money is not a valid reason for paying Land Transaction Tax late, and businesses must plan ahead for tax payments.

Introduction
Prime Aesthetics Ltd faced penalties for not paying Land Transaction Tax (LTT) on time for a hotel purchase.

Example scenario where this case law principle is relevant
A business buys a property but fails to pay the required LTT due to financial difficulties, such as a delayed bank loan or unexpected events affecting cash flow. The Welsh Revenue Authority (WRA) imposes a penalty for late payment, and the business appeals, citing these difficulties as a reasonable excuse.

The legal principles agreed upon
The tribunal confirmed that an insufficiency of funds, unless due to events outside the taxpayer’s control, does not constitute a reasonable excuse for late payment of LTT. The burden of proof lies on the taxpayer to demonstrate a reasonable excuse, which must be objectively reasonable, taking into account the taxpayer’s situation and attributes.

General summary
In this case, Prime Aesthetics Ltd purchased a hotel but did not pay the LTT by the due date, resulting in a penalty from the WRA. The company appealed, arguing that delays in securing a bank loan and unexpected shareholder issues, compounded by the COVID-19 pandemic, prevented timely payment. 

However, the tribunal found these reasons insufficient to constitute a reasonable excuse, noting that financial management and foresight should have anticipated such tax obligations. The decision emphasises the importance of planning for tax liabilities and the limited scope of what constitutes a reasonable excuse for late payment. 

The appeal was dismissed, and the penalty upheld, highlighting the strict approach taken towards tax payment deadlines and the limited circumstances under which penalties may be waived.

Procedure Case: Dispute Arises Over Validity of MDR Relief Claim Beyond 12-Month Window for Real Estate Company

(Case Law>Procedure Cases)

Multiple Dwellings Relief (MDR) ceased on June 1, 2024

Smith Homes 9 Ltd v Revenue And Customs (STAMP DUTY LAND TAX – Multiple Dwellings Relief) [2021] UKFTT 226 (TC) (25 May 2021). Cite as: [2021] UKFTT 226 (TC).

URL: https://www.bailii.org/uk/cases/UKFTT/TC/2021/TC08175.html 

Failing to claim Multiple Dwellings Relief on time means you cannot get a Stamp Duty Land Tax refund later, stressing the importance of timely and correct claims.

Introduction
This case revolves around an appeal against a refusal for a Stamp Duty Land Tax (SDLT) overpayment claim related to Multiple Dwellings Relief.

Example scenario where this case law principle is relevant
In real life, this principle could apply to a property development company purchasing a building for conversion into residential units. If the company mistakenly pays SDLT without claiming Multiple Dwellings Relief due to unawareness or incorrect advice, and later seeks to claim a refund, this case provides insight into the legal and procedural complexities involved in such a scenario.

The legal principles agreed upon
The main legal principles established include the strict adherence to time limits for claiming SDLT refunds, the importance of correctly applying for Multiple Dwellings Relief, and the procedural requirements for HMRC to consider a refund claim. The case underscores that HMRC is not obligated to refund overpaid tax if the claim falls within specific exceptions, particularly if the taxpayer could have claimed relief but did not do so within the stipulated time frame.

General summary
Smith Homes 9 Ltd purchased a building intending to convert it into residential units but did not claim Multiple Dwellings Relief at the time of the SDLT payment. The company later sought a refund, arguing that it had overpaid SDLT. HMRC refused the refund on the basis that the claim was made outside the allowed period and that the company should have been aware of the relief availability. The tribunal examined whether HMRC’s refusal was justified, considering legal provisions on overpaid tax relief and the procedural errors made by HMRC in handling the claim. Despite procedural missteps by HMRC, including incorrect enquiry notices, the tribunal found that the company’s appeal lacked a valid basis since it was out of time to make a valid claim for the relief. The decision highlights the critical importance of timely and correctly claiming tax reliefs and the procedural intricacies in tax dispute resolutions. The case also illustrates the tribunal’s approach to handling appeals and the significance of ensuring that all procedural requirements are met, both by taxpayers and HMRC, in the tax claim process. 

Procedure Case: Eligible for SDLT Repayment Due to Contingent Transaction Consideration

(Case Law>Procedure Cases)

Project Blue Ltd v Revenue & Customs (STAMP DUTY LAND TAX – contingent consideration)) [2020] UKFTT 475 (TC) (24 November 2020)

https://www.bailii.org/uk/cases/UKFTT/TC/2020/TC07949.html 

If parts of a property payment are based on future events and don’t happen, you can get some of the paid Stamp Duty Land Tax back.

Introduction
The case revolves around Project Blue Ltd’s (PBL) appeal for a repayment of Stamp Duty Land Tax (SDLT) related to its acquisition of Chelsea Barracks.

Example scenario where this case law principle is relevant
In real estate transactions involving contingent consideration, such as future payments dependent on specific events, this case illustrates how SDLT obligations might be recalculated if the contingent payments do not materialise.

The legal principles agreed upon
The tribunal found that certain parts of the transaction’s consideration, previously deemed chargeable, were contingent. Therefore, PBL was entitled to a repayment of SDLT for the portion of the consideration that was contingent and ultimately not paid.

General summary
The case detailed a complex real estate transaction where PBL purchased Chelsea Barracks with financing arrangements that included contingent payments. 

The Supreme Court had previously ruled that PBL was liable for SDLT on a chargeable consideration of approximately £1.25 billion, resulting in a £50 million SDLT payment. 

PBL argued that part of this consideration was contingent and, since it was not paid, sought a repayment of £11.64 million in SDLT.

 The tribunal agreed with PBL, finding that the unpaid portions of the consideration were indeed contingent, thus entitling PBL to the repayment. 

This decision underscores the importance of accurately determining the nature of transactional payments in calculating SDLT liabilities, especially in complex financing arrangements.

 

Procedure Case: Appellants Granted Right to Withdraw SDLT Appeals Unless HMRC Objects Within 30 Days

(Case Law>Procedure Cases)

Albert House Property Finance PCC Ltd & Anor v Revenue and Customs (STAMP DUTY LAND TAX) [2020] UKUT 373 (TCC) (4 January 2021). Cite as: [2020] UKUT 373 (TCC), [2021] BTC 506.

URL: https://www.bailii.org/uk/cases/UKUT/TCC/2020/373.html 

You can withdraw a Stamp Duty Land Tax appeal unless HMRC disagrees within 30 days, but their objection doesn’t have to be told to you directly.

Introduction
The case revolves around the ability of appellants to withdraw their appeals against Stamp Duty Land Tax (SDLT) decisions.

Example scenario where this case law principle is relevant
This principle could apply in situations where companies involved in SDLT avoidance schemes wish to withdraw their appeals against HMRC’s decisions, but face objections from HMRC.

The legal principles agreed upon
The main legal principles established include that an appellant can withdraw an SDLT appeal unless HMRC objects within 30 days by giving written notice. The case also clarified that HMRC’s objection does not need to be communicated directly to the taxpayer for it to be valid.

General summary
The case involved two companies, Albert House and Vale Property, both in liquidation, appealing against decisions related to SDLT appeals. They wished to withdraw their appeals, but HMRC objected. The Upper Tribunal (Tax and Chancery Chamber) had to decide if the appeals could be withdrawn in light of HMRC’s objections. 

The tribunal found that HMRC’s objections, even though not communicated directly to the appellants but through the First-tier Tribunal (FTT), were valid. The FTT’s decisions, which refused the appellants’ applications to strike out their appeals or to end proceedings under discretionary powers, were upheld. 

This case underscores the importance of the procedural aspects of tax appeals and the conditions under which an appeal can be considered withdrawn. It highlights the tribunal’s role in ensuring that tax liabilities are correctly assessed, even if the taxpayer wishes to withdraw their appeal, and confirms that HMRC’s objections to such withdrawals must be considered within the statutory framework, even if communicated indirectly.

 

Procedure Case: Appeal Dismissed: Closure Notice Confirms Stamp Duty Land Tax Inquiry Opened on Time; Property Not Deemed Replacement Residence

(Case Law>Procedure Cases)

COHEN v Revenue & Customs (Income Tax – closure notice – stamp duty land tax) [2023] UKFTT 90 (TC) (30 January 2023)
https://www.bailii.org/uk/cases/UKFTT/TC/2023/TC08718.html 

Buying a new house doesn’t automatically make it a replacement for your main residence for tax purposes, and the tax inquiry was opened on time.

Introduction:
This case involves Mr. Benjamin Cohen’s appeal against a closure notice for the higher rate of Stamp Duty Land Tax applied to his purchase of a property, Luna Court.

Example scenario where this case law principle is relevant:
In situations where an individual purchases a new property and claims it as a replacement for their only or main residence to avoid higher Stamp Duty Land Tax rates, this case’s principles would apply. For instance, if someone buys a new house shortly after selling their previous home, whether the new house qualifies as a replacement for tax purposes depends on similar criteria discussed in this case.

The legal principles agreed upon:
The main legal principles established in this case revolve around the definition of a property being a replacement for the appellant’s only or main residence under the Finance Act 2003. Specifically, it was contested whether Luna Court was a replacement for Mr. Cohen’s only or main residence, focusing on Condition D of the applicable tax legislation. The tribunal found that the enquiry by HMRC was opened within time and that Luna Court did not qualify as a replacement for Mr. Cohen’s only or main residence, leading to the dismissal of the appeal.

General summary:
The tribunal meticulously examined the criteria for a property to be considered a replacement for one’s only or main residence under the Stamp Duty Land Tax regulations. Despite Mr. Cohen’s brief occupation of Sherrard Road and his intentions to make it his main residence, the tribunal concluded that his actions and decisions prior to moving in indicated that he did not view Sherrard Road as his permanent home. The decision to sell Sherrard Road and purchase Luna Court before even moving into Sherrard Road was pivotal. Furthermore, the tribunal highlighted that mere occupation of a property does not equate to it being one’s main residence, emphasising the importance of the occupant’s intentions and the permanence of their stay. The appeal was dismissed based on these findings, underscoring the nuanced interpretation of what constitutes a replacement for one’s only or main residence in the context of Stamp Duty Land Tax.

Procedure Case: Key Legal Precedents Set in Tax Filing Case: Defining ‘Reasonable Excuse’ and Taxpayer Responsibilities

(Case Law>Procedure Cases)

Hill Residential Ltd and Latimer Developments Ltd v Revenue and Customs (STAMP DUTY LAND TAX : Land Transaction Return) [2018] UKFTT 39 (TC) (06 February 2018). Cite as: [2018] UKFTT 39 (TC). 

URL: http://www.bailii.org/uk/cases/UKFTT/TC/2018/TC06317.html 

Delays caused by waiting for necessary information from tax authorities can be considered a reasonable excuse for late tax filing.

Introduction
This case involves an appeal by Latimer Hill LLP against a £100 penalty imposed by HMRC for failing to submit a land transaction return on time.

Example scenario where this case law principle is relevant
In a real-life scenario, a business partnership fails to submit a required tax document by the deadline due to administrative delays in receiving necessary identification numbers from tax authorities. Despite efforts to comply and communicate with the tax authorities, they are penalised.

The legal principles agreed upon
The main legal principles established in this case include the definition of a reasonable excuse for failing to meet tax filing deadlines and the responsibilities of taxpayers in ensuring timely submission of tax documents. The tribunal examined whether the appellant had a reasonable excuse for the delay, considering their actions to comply with tax obligations.
General summary
Latimer Hill LLP, a partnership formed by Hill Residential Ltd and Latimer Developments Ltd, acquired land for £15,000,000, incurring a Stamp Duty Land Tax (SDLT) of £739,500.
The deadline for filing the land transaction return and paying the tax was missed by 35 days due to delays in receiving a VAT number from HMRC, despite repeated inquiries and follow-ups by the appellant. HMRC imposed a £100 penalty for late filing. The appellant argued that the delay was due to HMRC’s failure to provide a VAT number and clear guidance for LLPs, which they believed constituted a reasonable excuse. The tribunal found that the appellant acted prudently and diligently, making reasonable efforts to comply with their tax obligations. The penalty determination by HMRC was deemed invalid as it lacked evidence of being issued by an authorised officer and considering the appellant’s reasonable excuse. 

Consequently, the tribunal cancelled the £100 penalty, highlighting the importance of taxpayers’ efforts to comply with tax obligations and the need for clear, accessible guidance from tax authorities.

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This Article Written By Nick Garner
Founder Stamp Duty Advice Bureau
Author of Stamp Duty Land Tax Guide
For Property Investors.