The Court of Appeal agreed with HMRC’s analysis of the SDLT liability in Fanning v HMRC [2023] EWCA Civ 263.
Mr Fanning bought a flat in Grosvenor Square for £5.2 million, including £200,000 allocated to chattels. He filed an SDLT return showing no SDLT liability, on the basis of another transaction he entered into on the same date. This was an agreement entered into between Mr Fanning and an Irish incorporated company, under which Mr Fanning agreed to grant that company an option to purchase the property. The consideration for the option was £100.
The taxpayer had already lost at the FTT and the UT, and HMRC stated that there were 41 appeals standing behind this one, with more than £4 million at stake.
The decision of the Court of Appeal to reject the taxpayer’s appeal was clear, and included the following references to FA 2003:
“In summary, a natural interpretation of the statutory language leads to the conclusion that the grant of an option does not, without more, answer the statutory description in s. 45(1)(b). It is not an “other transaction” as referred to in that provision.”
“This conclusion is also consistent with the obvious policy objectives. SDLT is a tax on transactions. Section 44 is a key provision that imposes SDLT on transactions of the kind entered into [in this case].”
“Parliament cannot readily be taken to have intended that s. 45 should provide a means of avoiding SDLT altogether by the simple mechanic of the grant of an option, in circumstances where it is P and not T who ends up with the enjoyment of the land. It is no response to this that SDLT would be charged in the event that the option was exercised at a later date and the land was conveyed to T. The option may never be exercised. Further, if the option was exercised then that would be a different transaction that would be subject to SDLT in the normal way in accordance with s. 44.”
The Court also dismissed various other grounds of appeal.
In view of its decision, the Court did not need to consider the SDLT anti-avoidance legislation (s. 75A).
https://www.bailii.org/ew/cases/EWCA/Civ/2023/263.html
Related content from Claritax Books
Stamp Duty Land Tax is a well-written, user-friendly guide to the complexities of SDLT, written for accountants, solicitors and other tax professionals, with plenty of worked examples. Topics covered include basic principles, leasehold transactions, partnerships, trusts, reliefs, anti-avoidance legislation and recent tribunal decisions. Full reference is made throughout to relevant legislation, case law and guidance from HMRC.
