Pulak Rakshit & Ors v The Commissioners for HMRC
[2023] UKFTT 1044 (TC)
Olu Olufote v The Commissioners for HMRC
14 March 2023
[2023] UKFTT 130 (TC)
First-tier Tribunal
Someone tried to avoid paying taxes on their house by using a complicated scheme. The tax court said the scheme was just a trick to avoid taxes, and the person had to pay the taxes anyway. It was like trying to hide money, but they got caught.
Key Facts
- •The appellant used a Stamp Duty Land Tax (SDLT) avoidance scheme to acquire a residential property.
- •The scheme involved a sub-sale contract to a trust with a 124-year completion date and a second sub-sale contract to a company.
- •HMRC challenged the scheme's effectiveness in avoiding SDLT.
- •The appellant did not appear at the hearing but consented to the proceedings continuing in his absence.
- •The transaction occurred in July 2011, with the enquiry opening in March 2012 and the closure notice issued in March 2020.
Legal Principles
Section 45 FA 2003 requires a 'transfer of rights' conferring an entitlement to call for a conveyance, similar in quality to the original contract.
DV3, Fanning, Project Blue, HMRC v Candy, St Matthews
Section 45 works with Section 44 to charge the 'real' purchaser; the transferee stands in the shoes of the original purchaser.
HMRC submissions based on case law
A purposive construction of the law applied to the facts realistically; elements of schemes with no business purpose (solely tax avoidance) can be disregarded.
Ramsay principle, Hurstwood Properties
Section 75A FA 2003 is a targeted anti-avoidance provision to combat SDLT avoidance, particularly sub-sale schemes.
Project Blue
Outcomes
Appeal dismissed.
Sub-sale relief under section 45 FA 2003 does not apply because the scheme's 124-year completion date was artificial and lacked the intent of genuine transfer of rights. Section 75A FA 2003 applies, resulting in SDLT liability.
SDLT liability of £9,750 upheld.
The scheme was a tax avoidance scheme with no purpose other than avoiding SDLT; the 'real' purchaser was the appellant, who retained beneficial ownership and enjoyment of the property throughout.
Appellant's procedural grounds of appeal dismissed.
The delay in HMRC's investigation did not cause prejudice to the appellant, and the tribunal lacked jurisdiction to address certain aspects of the claim.