HMRC have won their case at the Upper Tribunal (UT) concerning the rate at which SDLT should be levied against a transaction.  The case concerned the acquisition of property that was split into two titles, one a house and the other a converted garage that was rented out as an artist’s studio.  The taxpayer, the property purchaser, had arranged for a short-term lease of the converted garage to a photographic studio so that it was operational at the time of acquisition.

The First-tier Tribunal (FTT) had found that the short-term lease was a relevant factor to consider when deciding whether the property was suitable for use as a dwelling.  HMRC appealed this decision.

The UT agreed with the FTT, the lease between the property vendor and the photographic studio was a relevant factor to consider.  The UT held, in accordance with established case law, that determining whether a property was suitable for use as a dwelling was a multi-factorial question and that private law matters, such as a short-term lease were relevant factors.  The UT dismissed this ground of HMRC’s appeal.

The UT didn’t agree with the FTT concerning a public law matter, that of planning consent.  The UT noted that the FTT’s decision had not addressed the submissions of the parties concerning planning consent, the converted garage only had planning consent for residential use.  The UT found that this was a material error in law and therefore set aside the FTT’s decision.  Having set aside the FTT’s decision, it remade the decision in favour of HMRC finding that the converted garage was suitable for use as a dwelling and therefore subject to the higher rates of SDLT.  The UT confirmed that in making this decision it had considered the private law matter of the lease with the photographic studio and the public law matter of the lack of planning permission for commercial use.

The UT also found that the FTT had misinterpreted some anti-avoidance legislation, but this was immaterial since it had remade the FTT’s decision due to lack of reasoning behind not taking the planning permission factor into account.

In a harsh final decision, the UT disallowed the claiming of multiple-dwellings relief, that the FTT had granted, that would have been available to the taxpayer if a claim had been made.  In following a decision of the Court of Appeal (see our analysis of that case here) the UT found that the taxpayer hadn’t claimed for the relief on a return or via the enquiry that had HMRC opened and therefore following the strict time limits he was time-barred from claiming the relief.

The decision can be found at: THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMS v DANIEL RIDGWAY [2024] UKUT 00036 (TCC) – GOV.UK (www.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.

We can further help where you may be sold a scheme to avoid SDLT.  The anti-avoidance provisions are now more tightly drafted than they were when the transaction took place in the above case.