In Carl James v The Welsh Revenue Authority [2022] TC8563, the First Tier Tribunal (FTT) held the purchase of a property, which was then combined with an existing main residence, amounted to the purchase of an additional property. Consequently, it was chargeable to a higher rate transaction for the purposes of Welsh Land Transaction Tax (LTT).

  • The taxpayer owned an end-of-terrace property.
  • He purchased the neighbouring property in October 2019 with the intention of removing partition walls to form a single larger property. This work started immediately.
  • A Land Transaction Tax return was filed on the basis that the higher rate of LTT was not due.
  • The Welsh Revenue Authority (WRA) opened an enquiry, issuing a closure notice by email and raised penalties on the basis that the taxpayer had acted Carelessly.
  • Following an unsuccessful Statutory Review, the taxpayer Appealed to the FTT.

The FTT found that:

  • That the closure notice was issued by email did not invalidate it. The legislation did not preclude a notification by email and the taxpayer had given written permission to be contacted by email in any event.
  • The purchase of the neighbouring property was a Higher Rate Transaction as:
    • The purchasers were individuals.
    • The purchase was of a major interest.
    • The chargeable consideration was in excess of £40,000.
    • At the end of the day of purchase the taxpayer held a major interest in another dwelling worth in excess of £40,000.
      • The taxpayers' submission that at the end of the day there was only a single larger property (as internal access between the two properties was created immediately) was dismissed.
    • The exemptions from the charge did not apply as:
      • The newly purchased property had not formed part of the main residence prior to its purchase.
      • The old main residence had not been replaced as the prior main residence was still owned.
    • The LTT return submitted was inaccurate and had been completed Carelessly as there was no reasonable basis for the taxpayer adopting the approach that they had.
    • The penalty had been calculated on the wrong basis and the disclosure made should have been taken into account.

The appeal was allowed in part.

Useful guides on this topic

Welsh LTT Rates
This is a freeview 'At a glance' guide to Land Transaction Tax rates. 

Welsh Land Transaction Tax
What is Land Transaction Tax? How does it operate? What reliefs are available? 

Welsh LTT vs SDLT: Comparing the rates and additional dwellings charge
How does Welsh Land Transaction Tax (LTT) compare to Stamp Duty Land Tax (SDLT)? What are the key similarities and differences?

Penalties: Errors in Returns and Documents (subscriber version)
What penalties apply if you make an error or mistake? How are penalties calculated? How do you check penalties? What can you do if you receive a penalty?

Penalties: Deliberate Behaviour
What penalties apply to deliberate behaviour? What is deliberate behaviour?

External links

Carl James v The Welsh Revenue Authority [2022] TC8563

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