GMR Property Ltd v The Commissioners for HMRC
[2024] UKFTT 871 (TC)
Mayfair Avenue Limited v The Commissioners for HMRC
23 May 2024
[2024] UKFTT 430 (TC)
First-tier Tribunal
A company bought a house that was the owner's family home. Even though they planned to rent it out, the family lived there for a while afterwards. The tax office said they owed more tax because of this, and the court agreed. The rules are strict, and it didn't matter that they didn't make extra money or didn't know about the extra tax.
Key Facts
- •Mayfair Avenue Limited (MAL) acquired a property for £650,000 and paid £27,000 in SDLT.
- •The property was the director's family home for over a decade before the transfer.
- •The family continued to live in the property for 10 months post-transfer.
- •HMRC issued a closure notice for an additional £70,500 SDLT due to the higher rate applying to companies.
- •MAL argued the higher rate shouldn't apply because they intended to rent the property and paid market rent while occupying it.
- •MAL's director was unaware of the higher SDLT rate implications.
- •HMRC argued that the director, as the sole shareholder and director, was a connected person and therefore a non-qualifying individual under Schedule 4A FA 2003.
Legal Principles
Higher rates of SDLT apply to higher threshold interests (chargeable consideration > £500,000) in dwellings acquired by companies.
Schedule 4A, Finance Act 2003
Relief from higher SDLT rates is available if the property is acquired exclusively for rental purposes in a qualifying business, unless a non-qualifying individual occupies it.
Paragraph 5, Schedule 4A, Finance Act 2003
A non-qualifying individual includes a person connected with the purchaser (e.g., someone with control of the company).
Paragraph 5A, Schedule 4A, Finance Act 2003; Section 1122, Corporation Tax Act 2010
HMRC can issue a closure notice amending an SDLT return within 9 months of filing.
Paragraph 12 & 23, Schedule 10, Finance Act 2003
Tribunal has limited power to consider fairness beyond the statutory regime for SDLT appeals.
Beadle v HMRC [2019] UKUT 101 and KSM Henryk Zeman SP Z.o.o. v HMRC [2021] UKUT 182
Outcomes
MAL's appeal was dismissed.
The Tribunal found that the conditions for the higher SDLT rate were met and the relief was not applicable because the director (a connected person) occupied the property, fulfilling the definition of a non-qualifying individual, despite the intention to rent it later.
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