In Mr and Mrs Murphy v HMRC [2024] TC9324, the FTT calculated that the chargeable consideration created under a failed Stamp Duty Land Tax (SDLT) sub-sale scheme was substantially greater than the chargeable consideration on the actual sales proceeds of the property.
Mr and Mrs Murphy purchased a residential property for £277,000.
- Relying on the advice of a law firm they entered into a sub-sale Stamp Duty Land Tax (SDLT) scheme. They reported SDLT based on a chargeable consideration of just £119,110
- The law firm was subsequently struck off by the Solicitors Regulation Authority (SRA) and HMRC decided to enquire into the failed firm’s SDLT claims.
- HMRC noted that the Land Registry listed the total consideration on the house sale of £277,000 and raised assessments to recover the balance of SDLT due.
- The taxpayers appealed.
The First Tier Tribunal (FTT) considered the scheme.
- Mr Murphy, representing himself and his wife, attempted to explain that the intended effect of sub-sale relief provisions was that the consideration for the entire property fell outside the charge to SDLT.
- The FTT noted that there were effectively two parts to the Property: a 57% interest worth £157,890 acquired by Mr Murphy and a 43% interest worth £119,110 acquired by his wife.
- Under the terms of the sub-sale, Mrs Murphy purchased 56% of the property, leaving her husband with 1%.
- Working through the legislation in s.45 Finance Act 2003, the FTT found that under its interpretation, the total consideration payable was not £277,000, at all, it was £336,555.
- The effect of the planning was that Mrs Murphy was also agreeing to pay Mr Murphy’s half of the £119,110. That added £59,555 to the total consideration.
- The FTT then applied the anti-avoidance provisions in s.75A and reached the same total.
The case was dismissed and the parties were left to agree on whether the consideration should be £277,000 (the original purchase price) or £336,555.
Useful guides on this topic
SDLT: Start here!
What is SDLT? What are the SDLT rates? What is exempt from SDLT? What reliefs are available? When are returns due? When can you amend a return?
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