Court of Appeal Upholds Decision Against SDLT Avoidance Scheme in Michael Brown v The Commissioners for HMRC

Citation: [2024] EWCA Civ 92
Judgment on


The case of Michael Brown v The Commissioners for His Majesty’s Revenue & Customs significantly contributes to the understanding of Stamp Duty Land Tax (SDLT) avoidance schemes and the application of purposive interpretation in tax legislation. The Court of Appeal’s judgment elucidates on the principles regarding SDLT, the interpretation of tax avoidance schemes, and administrative law regarding HM Revenue & Customs (HMRC) determinations.

Key Facts

Mr. and Mrs. Brown engaged in a pre-planned avoidance scheme designed to facilitate the acquisition of a Surrey property without incurring SDLT liability. This scheme was terminated through a series of steps that involved setting up an unlimited company, termed as ‘B’, with Mr. and Mrs. Brown subscribing for shares in ‘B’. ‘B’ then contracted to purchase the desired property, followed by a distribution in specie to Mr. and Mrs. Brown, thus transferring the property to them without any noticeable SDLT.

The First-tier Tribunal (FTT) and Upper Tribunal (UT) both adjudged the SDLT avoidance scheme unsuccessful, albeit for diverging reasons. The UT decision hinged on the purposive interpretation of Section 45 of the Finance Act 2003, particularly focusing on the “indirect” provision of consideration element within the SDLT legislation framework.

Purposive Interpretation

The Court of Appeal relied heavily on the Supreme Court’s exposition in Rossendale BC v Hurstwood Properties regarding purposive interpretation. The principle emanates from the case WT Ramsay Ltd v IRC and is applicable to all statutes, compelling a contextual approach to statutory interpretation. This means examining the scheme as a whole rather than individual steps in isolation, especially in pre-ordained plans designed exclusively for tax avoidance purposes.

Section 45 of the Finance Act 2003

The pivotal argument in the case revolved around Section 45(3)(b)(i) of the Finance Act 2003, which prescribes that the secondary contract’s consideration includes consideration under the original contract provided “indirectly” by the transferee or a person connected with them. The court concluded that the funds provided by Mr. and Mrs. Brown to the unlimited company for purchasing the property constituted indirect consideration under the original contract.

Connection to Company and SDLT Implications

The Court also pointed out that as the unlimited company was connected with Mr. and Mrs. Brown, the scheme fails on this basis too. Though it was argued that HMRC, having elected not to pursue this line of argument initially, should be precluded from doing so at a later point, the Court determined that the point was lawfully taken on appeal.

Section 75A and Notional Transactions

The Court examined Section 75A, an anti-avoidance provision, concluding that it changes nothing about HMRC’s determination’s validity. The section replaces real-world transactions with notional ones for calculating SDLT liability. The Court found that HMRC’s assessment remained pertinent to the Browns’ acquisition, irrespective of whether the liability arose from actual or notional transactions.


The Court of Appeal upheld the UT’s decision that the SDLT avoidance scheme did not succeed, and the SDLT chargeable consideration amounted to the property’s purchase price. This demonstrates that transactions within avoidance schemes can be indistinguishably linked to the tax liability they attempt to circumvent. The Court also approves HMRC’s action in issuing a determination without a need to specify whether SDLT liability arises from actual or notional transactions under Section 75A.


This case reaffirms the judiciary’s stance against SDLT avoidance schemes through the application of purposive interpretation to tax legislation. It verifies that courts can reject transactions or steps in a scheme that serve no business purpose beyond tax evasion. For legal professionals, Michael Brown v The Commissioners for His Majesty’s Revenue & Customs serves as a critical reminder that all aspects of a scheme will be scrutinised collectively, and the use of intermediary companies does not necessarily insulate taxpayers from SDLT liability. This judgment encapsulates the broader context of the UK’s legislative intent against tax avoidance and offers clear directions for similar future affairs.