Stamp taxes newsletter: February 2023
Updated 24 February 2023
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This publication is available at https://www.gov.uk/government/publications/stamp-taxes-newsletters/stamp-taxes-newsletter-february-2023
HMRC warns homeowners of the risks with Stamp Duty Land Tax repayment agents
HMRC published a press release warning new homeowners about cold calls from rogue tax repayment agents. These calls encourage the homeowners to make speculative Stamp Duty Land Tax refund claims using the agents. This could leave the homeowners with large tax bills.
Relief for accommodating refugees under the Homes for Ukraine Sponsorship Scheme
A written ministerial statement announcing new and temporary reliefs from Annual Tax on Enveloped Dwellings (ATED) and the 15% rate of Stamp Duty Land Tax was published on 31 March 2022. These reliefs apply when dwellings are made available for occupation by refugees under the Homes for Ukraine Sponsorship Scheme.
Technical Guidance
- Section 41A of the Annual Tax on Enveloped Dwellings technical guidance
- SDLTM09652 — Relief for the ‘Homes for Ukraine’ scheme
- SDLTM09656 — Withdrawal of relief and the ‘Homes for Ukraine’ scheme
Customer Guidance
Recent Upper Tribunal decisions
HMRC v Priory London Ltd and Jocoguma Properties Ltd
In HMRC v Priory London Limited and HMRC v Jocoguma Properties Ltd [2022] UKUT 00225, the Upper Tribunal overturned a previous First-tier decision on Annual Tax on Enveloped Dwellings late filing penalties and confirmed that HMRC can charge daily penalties retrospectively.
HMRC v Ladson Preston Ltd and AKA Developments Greenview Ltd
In Ladson Preston Ltd and AKA Developments Greenview Ltd v HMRC [2022] UKUT 301, the Upper Tribunal confirmed that there must be some physical manifestation of a building in order for a building to be ‘in the process of being constructed or adapted’ for use as a dwelling.
The tribunal also found that as a transactional tax, Stamp Duty Land Tax must be calculated based on the chargeable interest, as it stood at the time of completion. Any events after the point of completion are not relevant.
HMRC v Christian Peter Candy
In HMRC v Christian Peter Candy [2022] EWCA Civ 1447, the Court of Appeal supported the earlier Upper Tribunal decision, finding that where a substantially performed contract is later rescinded, annulled or otherwise not carried into effect, any repayment of tax can only be claimed by an amendment of the return, and that the normal 12 month time limit applies.
The Court of Appeal commented that if Parliament had intended for there to be a different time limit (such as being able to make a claim once the amendment window had closed) then it would have expressly provided for this. Hard-edged time limits are a feature of a self-assessment scheme, and this outcome is not unfair, being consistent with the transactional nature of Stamp Duty Land Tax.
Multiple dwellings relief — HMRC v Andrew and Tiffany Doe
In Andrew and Tiffany Doe v The Commissioners for HM Revenue and Customs [2022] UKUT 00002 the Upper Tribunal upheld the First-tier decision, finding that it had correctly focused on suitability for use as 2 separate dwellings at the effective date of transaction, rather than historic use.
This is a further case highlighting that the correct approach when considering if there are one or more dwellings is established in the Upper Tribunal case of Fiander and Brower and outlined in HMRC’s guidance from SDLTM00410 — How many dwellings? onwards.
HMRC v Hyman and Goodfellow
In (1) David Hyman and Sally Hyman and (2) Craig Goodfellow and Julie Goodfellow v HMRC[2022] EWCA Civ 185, the Court of Appeal confirmed the Upper Tribunal decision that for Stamp Duty Land Tax purposes, grounds of a dwelling are not confined to that which is required for the reasonable enjoyment of the dwelling, a definition used in capital gains tax. There is no size limit to what might be classed as grounds for Stamp Duty Land Tax.
HMRC v Oisin Fanning
In Oisin Fanning v HMRC [2022] UKUT 00021, the Upper Tribunal dismissed an appeal against a £250,000 assessment for Stamp Duty Land Tax related to an avoidance scheme involving historic sub-sale relief legislation (former section 45 of Finance Act 2003) and its interaction with options.
The Upper Tribunal agreed with HMRC and found that the option granted as part of the avoidance scheme did not fall within the definition of ‘an assignment, sub-sale or other transaction’ in the former section 45(1)(b) so the sub-sale rules did not apply.
Read the full decision for Oisin Fanning v HMRC [2022] UKUT 00021.
HMRC v Stuart Fox
In Stuart Fox v The Commissioners for HM Revenue and Customs [2022] UKUT 00310, the Upper Tribunal agreed with the First-tier tribunal, confirming that the assessment to Stamp Duty Land Tax on a failed historic sub-sale avoidance scheme involving the transfer of property from wife to husband, was correctly made on the husband alone. The appeal was therefore dismissed.
HMRC v Brown and Anor
In Brown and Anor v HMRC [2022] UKUT 298, the Upper Tribunal dismissed an appeal against the decision of the First-tier tribunal that an avoidance scheme involving historic sub-sale relief legislation (the former section 45 of Finance Act 2003) and its interaction with a distribution in specie from a company meant there was no chargeable consideration.
The Upper Tribunal agreed with HMRC and found that in the context of a pre-ordained scheme the funds provided to the company to purchase the property constituted consideration under the sub sale rules.
Read the full decision for Brown and Anor v HMRC [2022] UKUT 298.
Residential property — First-tier Tribunal decisions
HMRC v Gary Withers — gardens and grounds
In Gary Withers v HMRC [2022] UKFTT 00433, the appellant acquired a residential property with substantial land including gardens, grazing land and woodland.
The First-tier tribunal concluded that the grazing land and woodland did not form part of the gardens and grounds of the property. Therefore, the property comprised both residential and non-residential property and was chargeable to Stamp Duty Land Tax at the lower non-residential rates.
While HMRC does not agree with the findings in this case, HMRC has not appealed the decision of the Tribunal. This case was decided based on its own specific facts and as a First-tier decision, it does not set legal precedent.
HMRC maintains that the existence of grazing, woodland or re-wilding agreements do not, in isolation, prevent land being categorised as the garden or grounds of a residential property for Stamp Duty Land Tax purposes. The correct multi-factorial approach to establish whether land forms part of the gardens and grounds of a property was outlined in the Upper Tribunal decision of Hyman and Others v HMRC [2021] UKUT, which supported HMRC’s guidance, available from SDLTM00440 — garden or grounds onwards.
HMRC v Sexton and Sexton — communal gardens
In Danielle Sexton and Emma Sexton v HMRC [2023] UKFTT 00073, the appellant acquired a leasehold flat which benefitted from access to a communal garden. The appellant argued that the right over the communal garden was non-residential, and therefore Stamp Duty Land Tax should be calculated at the lower non-residential rates.
The First-tier tribunal found that only the property (the leasehold flat) should be considered when determining what rate of Stamp Duty Land Tax to use. Even if the communal garden was to be considered, then the transaction would still be entirely residential.
This is the second clear and unequivocal First-tier decision supporting HMRC’s view on this matter. In both cases, which were claims bought by an Stamp Duty Land Tax repayment agent, the tribunal has found that a residential property acquired with the right over communal gardens is wholly residential. Read a related case on communal gardens — Khatoun v HMRC [2021] UKFTT 0104 on the Finance and Tax Tribunal website.
Read the full decision for Danielle Sexton and Emma Sexton v HMRC [2023] UKFTT 00073.
Guidance updates
Clearances — SDLTM51000
HMRC have updated the guidance in SDLTM51000 — Applications for non-statutory clearances for Stamp Duty Land Tax clearances to clarify the current position.
Higher rates for additional dwellings: Condition D exceptional circumstances — SDLTM09807
Additional examples have been included within the guidance in SDLTM09807 — Higher rates for additional dwellings which outline HMRC’s view of exceptional circumstances for higher rates for additional dwellings.
Special partnership provisions: Application of Group Relief (Para 27 FA03) — SDLTM34350
HMRC’s guidance from SDLTM34350 — Group relief onwards has been updated to clarify how group relief applies and interacts with the special provisions for partnerships, and now includes additional examples.
Residential Property: How many Dwellings? Forming a Balanced Judgement — SDLTM00415
HMRC’s guidance in SDLTM00415 — How many dwellings? Forming a balanced judgement has been updated to explain the ‘objective observer test’ which assists in deciding how many dwellings there are in a property purchase. This is the test that HMRC applies during any compliance checks involving claims for Multiple Dwellings Relief and has been advocated by the First-tier tribunal.
Stamp Duty Land Tax threshold increase for residential property
At the Growth Plan 2022, an increase in the thresholds of Stamp Duty Land Tax for residential property was announced. In the Autumn Statement 2022, the Chancellor announced that the threshold increases would be temporary. From 23 September 2022 to 31 March 2025:
- the nil-rate threshold of Stamp Duty Land Tax for residential property will be increased from £125,000 to £250,000
- the nil-rate threshold for first time buyers relief will be increased from £300,000 to £425,000
- the maximum amount that an individual can pay while remaining eligible to first time buyers relief will be increased from £500,000 to £625,000
From 1 April 2025, the thresholds will revert to the pre-23 September 2022 rates.
Paying Stamp Duty Land Tax
The most secure and efficient way is to pay Stamp Duty Land Tax electronically.
When making a Stamp Duty Land Tax payment make sure that you quote the correct Unique Transaction Reference Number (UTRN). The UTRN will always be made up of 9 digits and 2 characters. Do not add any other characters before or after the UTRN.
If you fail to quote the UTRN correctly or add anything to it a payment reminder will be issued and you will need to contact us with payment details.
You do not need to request a receipt when making payment. Provided that you quote the UTRN correctly and use the Stamp Duty Land Tax bank account details the payment will be allocated automatically.
Annual Tax on Enveloped Dwellings
The Annual Tax on Enveloped Dwellings is an annual charge that applies to any company (UK or overseas) which owns UK residential property worth more than £500,000.
Owners of such properties are legally required to pay an annual charge which is determined by the property’s value. Properties must also be revalued every 5 years.
As the 2023 to 24 tax year is a revaluation year, companies currently within ATED must revalue their properties using 1 April 2022 as the valuation date, or the date of acquisition if the property was acquired after that date.
Companies may own properties that were worth £500,000 or less at the last ATED revaluation date or when they were purchased and so were not liable to ATED at the time. They will now need to check whether those properties are worth more than £500,000 as at 1 April 2022, to establish whether they now fall within the scope of ATED. If so, the tax must be paid in April 2023.
There are reliefs from ATED which must be claimed in a return. Read more information about Annual Tax on Enveloped Dwellings and how to value your property.
Stamp Duty and Stamp Duty Reserve Tax
Repurchase of shares and loan capital by qualifying asset holding companies (QAHCs)
Qualifying asset holding companies are companies which hold and manage investments, and also meet certain conditions. On 1 April 2022, an exemption was introduced for the purchase of own shares and loan capital previously issued by QAHCs, as part of a wider QAHC measure.
Further information can be found in STSM041560 — Qualifying asset holding companies.
Securitisation and insurance-linked securities
On 17 May 2022, an exemption from Stamp Duty and Stamp Duty Reserve Tax was introduced on the transfer of capital market investments issued as part of capital market arrangements by insurance-linked securities qualifying transformer vehicles and note-issuing securitisation companies.
Further information can be found in STSM021247 — Securitisation and insurance-linked securities (ILS).
Repurchase of own shares — SH03 form
Notice of repurchases of own shares in accordance with section 707 Companies Act 2006 are made on an SH03 form, issued by Companies House. A new version of the SH03 was published in April 2022 and replaces the previous form. It includes an area for the HMRC Stamp Duty authentication code to be entered (where Stamp Duty has been paid and the SH03 stamped by HMRC before submission to Companies House) and also for exemption by qualifying asset holding companies to be self-certified.