A taxpayer has lost his appeal at the Court of Appeal concerning SDLT on the acquisition of a flat in Mayfair in September 2011. The flat cost £5m but the taxpayer contend that a relief was available to him to allow the amount chargeable to be considered as £100.
On the date of completion of the acquisition of the flat the taxpayer granted an option to his employer to acquire the flat in 5 years’ time with an exercise price that was equal to the market price of the flat. The premium paid by the employer for the option was £100. The taxpayer held that the option was similar to a subsale or assignment and therefore the amount was determined by reference to the subsale, ie the granted option premium.
Within the SDLT legislation there is a relief for subsales of properties. Where a person contracts to purchase a property, but before completion then arranges to transfer the property to someone else then this subsale is the value that is be considered for SDLT purposes and there is only one transaction for the purpose, despite there being two transactions in law. Crucially, this legislation requires that the transferee can call for a conveyance.
The CoA found that an option-over-land holder cannot call for a conveyance unless and until the option is exercised. While the option remains unexercised, the holder has no right to call for conveyance and therefore the option didn’t qualify as ‘an assignment, subsale or other transaction’ within the legislation of the relief.
In 2013, the relevant legislation regarding relief on transactions entered into before completion of contract has been rewritten with express reference that options are not relevant transactions for the purposes of the relief.
The decision can be found at: Oisin Fanning v The Commissioners for HMRC – Find case law (nationalarchives.gov.uk)
Please let us know if you have any questions regarding stamp duty land tax, we can assist with ensuing generous reliefs are appropriately applied. We can also advise when to make amendment to returns and how to negotiate with HMRC.
