In HMRC v Christian Peter Candy UKUT 0170, the Upper Tribunal (UT) allowed HMRC's appeal, finding an SDLT return could not be amended outside the standard 12-month window. It denied a multi-million-pound Stamp Duty Land Tax (SDLT) repayment.
- On 9 August 2012 the taxpayer, Christian Candy entered into two separate contracts to purchase interests in a property.
- The first contract was an ‘initial lease’ granted on 1 October 2012 for 25 years for a premium of £20m.
- This was accompanied by a deed covering the development of the property.
- On 10 August 2012, the taxpayers building contractors commenced work at the property to construct a flat.
- The ‘second lease’ was also entered into on 9 August 2012 for a term of 201 years from 1 October 2012 for a price of £48m payable in four instalments. The first instalment of £7.39m was paid on 1 October 2013.
- There were commercial reasons for the two leases as it prevented the later lease from giving the tenant the right to extend the lease or acquire the freehold of the property.
- On 1 April 2014, the taxpayer made a gift of his interests in the property to his brother, Nicholas Candy.
- The taxpayer, the original seller and Nicholas Candy signed a deed of novation discharging the taxpayer from all remaining obligations.
- All parties acknowledged that Nicholas Candy assumed the liability to perform all remaining obligations rather than the taxpayer including the development of the property.
- Nicholas Candy took possession of the property on that same date and paid the second and third instalments of the £48m consideration as they became due.
The SDLT dispute
- On 8 October 2012, the taxpayer made land transaction returns paying SDLT on both leases. The contract had been substantially performed as possession had been taken of the property by the taxpayer’s building contractors.
- Nicholas Candy became liable to fulfil the remaining obligations and pay the remaining £40.61m of the purchase price once the leases had been novated.
- As the deed of novation was a gift of an uncompleted contract special charging rules applied which render the consideration £48m for SDLT purposes.
- Nicholas Candy was liable to pay SDLT accordingly.
- The SDLT return for the second lease was based on a contract that was not completed. The taxpayer amended the SDLT return accordingly. This amendment was made on 10 April 2014,
- HMRC rejected the claim as it was made outside the 12-month amendment window.
- The taxpayer Appealed.
- The taxpayer also made a separate claim to amend the SDLT return for the second lease which is considered under a separate appeal.
The First Tier Tribunal (FTT) Allowed the amendment as:
- The standard amendment provisions state an SDLT return can be amended more than 12 months after the filing date if it is ‘otherwise provided’ in the legislation.
- It considered that Section 44(9) of Finance Act 2003 (s44(9)) was a provision which ‘otherwise provided’ that an amendment was allowed beyond these time limits.
- S.44(9) allowed an amendment to be made to an SDLT return where a contract is rescinded, annulled or for any other reason not carried out. The novation of the lease met this condition.
HMRC appealed to the UT.
The UT allowed the appeal finding that the amendment was out of time as:
- While s.44(9) provided scope to amend the land transaction return if the contract on which it was based was not fully carried out this was intended to form part of the Self Assessment tax system.
- It then followed that the standard time limits would apply to the amending of that land transaction return unless there were further provisions extending that time limit.
- The FTT had gone too far in interpreting that s.44(9) ‘otherwise provided’ for an extension to the standard 12-month amendment window.
- The UT did not consider that this decision caused an unfair outcome or double taxation as charging tax on two different persons by reference to different periods of property ownership is a natural incident of the SDLT system.
- The situation was similar to a property being sold to person A, then to person B and then to person C in quick succession. SDLT would be due (in the absence of other reliefs) on each transaction in turn.
Useful guides on this topic
SDLT: Amending returns
How do I amend an SDLT return? When can I amend an SDLT return?
SDLT: At a glance, Stamp Duty Land Tax, rates & allowances
What is Stamp Duty Land Tax (SDLT)? What are the rates of Stamp Duty Land Tax (SDLT)?
How to appeal an HMRC decision
Disagree with a HMRC decision? How to appeal, what type of decision can you appeal, what are your different options when you disagree with HMRC? What are the key steps in making an appeal?