In the case of Madsen v HMRC [2026] UKFTT 615 (TC), the FTT has allowed the taxpayer’s appeal against a discovery assessment charging SDLT on a failed avoidance scheme that had involved the granting of a call option prior to completion.
Keywords: SDLT avoidance; grant of call option prior to completion; Finance Act 2003, section 45 (as it stood in 2011); discovery assessment; knowledge of hypothetical officer; appeal allowed
All parties accepted that the planning had failed and that SDLT was due, subject only to the validity of the discovery assessment. The appellant had challenged the discovery assessment on the grounds that a letter sent to HMRC had provided sufficient disclosure to prevent the need for a later discovery and as such the assessment had been made out of time. HMRC had no copy of the letter, but the FTT judged that it had been sent and received:
“whilst it is undoubtedly the case that post occasionally goes astray in the Royal Mail, we consider (from our professional experience) that the risk of misfiling by HMRC is the more likely cause of something going wrong on the particular facts of this case. We say that notwithstanding the SDLT reference being correctly stated on the letter. Furthermore, we make the observation (from the timing outlined below) that HMRC do not appear even to have looked for the letter until the autumn of 2024 (i.e. over 12½ years after the letter was sent). That delay further increases the likelihood that any record of its receipt by HMRC would have been inadvertently destroyed in the interim.”
HMRC also argued that the letter was ineffective as it had not been sent by the Appellant nor a person acting on his behalf, but by the option holder. However, the FTT judged that “The statutory test ‘or a person acting on his behalf’ involves ordinary English words in an ordinary English phrase and we see no justification to give those words any broader or narrower meaning than the ordinary meaning of the phrase.” It was clear that the letter had been written on behalf of the Appellant as it explicitly noted that it should be treated as notification on behalf of all the parties to the scheme and cited the Appellant’s SDLT reference. Furthermore the Appellant had taken a copy and observed the process of the letter’s sending to ensure that the disclosure was effective. The FTT therefore concluded that the letter “was written (at least in part) on the Appellant’s behalf.”
Having confirmed that the contents of the letter was available to the hypothetical officer, the FTT then judged that he or she “would be imbued with the specialist knowledge about the meaning, scope and effect of section 45” and thus:
“It is our view, therefore, that the hypothetical officer would realise that, contrary to the intentions of the scheme, section 45 would not apply to relieve a purchaser from liability to SDLT in cases where the purchaser of land had granted a call option that had not been exercised by the time of the completion of the purchaser’s contract (or, at the very least, recognise that there was a reasonable prospect of the scheme being successfully challenged in the tribunals or courts and so the reversal of the relief claim would be justified).
For these reasons, the condition in paragraph 30(3) is not met and the assessment is therefore not valid.”
https://caselaw.nationalarchives.gov.uk/ukftt/tc/2026/615
Related content from Claritax Books
Discovery Assessments, by tax barrister Keith Gordon, is a detailed, clearly written guide to the law and practice in this area. Based on the author’s personal involvement in many leading cases, the book contains much practical advice explaining when and how such assessments may be challenged.
