In Waterside Escapes Ltd v HMRC [2020] TC7881, Stamp Duty Land Tax (SDLT) relief was clawed back on the purchase of a high-value residential property from a partnership due to its occupation by a director. It proved a challenge in determining how to attribute the control tests and calculate the Sum of the Lower Proportions.

  • The company ran a holiday property rental business.
  • It acquired a residential property from a connected Limited Liability Partnership (LLP) for £1,250,000.
  • As a 'non-natural person' the company claimed relief from the SDLT 15% higher rate charge on the basis that the property was being used by a property business.
  • A Shareholder agreement provided that the company’s owners were entitled to use the property for no charge for a maximum of five nights in any financial year.
  • HMRC denied the higher rate relief.
  • The company appealed.

The First Tier Tribunal (FTT) found that as it was intended from the outset that there would be owner-use. The property was not bought for the exclusive use of the property business, no SDLT relief was due and the 15% charge applied.

The company had also amended its appeal when it was spotted that it had incorrectly calculated the acquisition consideration.

  • The property had been acquired from a connected LLP. As such, chargeable consideration was decided on the outcome of the Sum of the Lower Proportions (SLP) calculation which prevailed over the normal SDLT market value rule.
  • Neither the company's SDLT expert nor HMRC could agree on the question as to who controlled the company, a necessary step in working out who is the relevant owner and the SLP.

The FTT found that the company was owned 50:50 by Helen Hume-Kendall (HHK) and a settlement. The LLP was owned by 50:50 by HHK and her husband Simon Hume-Kendall (SHK).

The control issue centred on the Close company control tests in s.450-451CTA 2010.

Whilst s.451 attributed the rights of the settlement to HHK, they controlled the company together. The question was whether those attributed rights should be attributed to SHK so that he could also be said to control the company. If so, the SLP calculation would produce no due SDLT.

The FTT spotted that the company had missed a vital line from the legislation in its skeleton argument and this confirmed that there was to be no attribution of the attributed rights of the settlement to HHK.

The appeal against the higher rate charge was unsuccessful although due to the corrected SLP calculations, the amount of the stated chargeable consideration was reduced from £1,250,000 to the correct amount of £625,000.


As the tribunal judge noted, "The meaning of s.451(5)(b) (CTA 2010) is somewhat cryptic."

The SLP calculation applies on a transfer out of a partnership (typically an incorporation) of a freehold or existing leasehold interest. The formula for the deemed consideration is 'MV × (100 - SLP)%', where 'MV' is the Market Value of the chargeable interest transferred. The SLP calculation is such that if both the LLP and company are controlled by the same persons, SLP will always equal 100 and this then provides no chargeable consideration as 100-100 = 0

Links to our guides

Incorporation: property business/buy to let
What reliefs can I claim if I incorporate my property business? What claims and elections do I need to make? What are the VAT and Stamp Duty Land Tax (SDLT) implications?

SDLT: Residential property higher rates
A guide to the Stamp Duty Land Tax (SDLT) higher rate charge on residential property, when it applies and what reliefs are available to exempt buyers from the charge.

Close companies: Definitions and control
A handy guide to the basic definitions of close companies and control.

External links

Waterside Escapes Ltd v HMRC [2020] TC7881


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