Mayfair Avenue Limited v The Commissioners for HMRC
[2024] UKFTT 430 (TC)
GMR Property Ltd v The Commissioners for HMRC
26 September 2024
[2024] UKFTT 871 (TC)
First-tier Tribunal
A company bought its directors' old house. HMRC said they owed more tax because the directors still lived there sometimes, even though the company claimed to be renting it out. The court agreed with HMRC, and the company had to pay more tax.
Key Facts
- •GMR Property Ltd (GMR), a company owned by Mr. Gurunathan (MG) and his wife, purchased a property ('Rosehill'), their former home, for £750,000.
- •An SDLT return was submitted based on standard residential rates, resulting in a payment of £35,000.
- •HMRC opened an enquiry, leading to a closure notice increasing SDLT by £77,500 due to the application of the higher 15% rate for higher threshold interests.
- •GMR appealed, arguing that exemptions under Schedule 4A of the Finance Act 2003 applied because the property was let commercially and made available to the public for over 28 days.
- •MG and RM initially claimed Rosehill was let commercially, then cited RM's health and MG's need to protect the property as reasons for their continued occupation.
- •A backdated tenancy agreement between GMR and MG/RM was presented, adding further complexity to the timeline of occupation.
Legal Principles
Higher rates of SDLT apply to higher threshold interests (interests in a single dwelling with chargeable consideration exceeding £500,000) acquired by companies.
Schedule 4A, Finance Act 2003
Relief from higher SDLT rates is available if the higher threshold interest is acquired exclusively for exploitation as a source of rents in a qualifying property rental business, unless a non-qualifying individual (connected to the purchaser) is intended to occupy the dwelling.
Schedule 4A, paragraph 5, Finance Act 2003
A non-qualifying individual includes someone connected with the purchaser; a spouse is considered connected under section 1122 CTA 2010.
Schedule 4A, paragraph 5A, Finance Act 2003; section 1122, Corporation Tax Act 2010
A separate exclusion from higher SDLT rates exists for trades involving making a dwelling available to the public for at least 28 days a year.
Schedule 4A, paragraph 5B, Finance Act 2003
HMRC can open an enquiry into an SDLT return within 9 months of the filing date.
Schedule 10, paragraph 12, Finance Act 2003
Outcomes
GMR's appeal was dismissed.
The Tribunal found that the higher SDLT rate applied because MG and RM, being connected to GMR, were permitted to occupy Rosehill, thus negating the rental business exemption. The 'available to the public' exemption was not met as GMR did not operate a qualifying trade.
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