Home Forums Patrick Cannon Should I appeal an SDLT mitigation scheme?

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  • #926 Reply

    Thanks Patrick.

    You advised on a post above that you would be able to defeat the 2nd charge at hearing prior to tribunal. Why do you feel you can defeat it? Mine is the same charge.


    #927 Reply
    Patrick Cannon

    Alps, please see my post above on 16/8/17 – In principle (and depending upon the actual details of the scheme you undertook) the SDLT charge should not exceed that on a single acquisition applying either the Ramsay approach or the statutory anti-avoidance in section 75A that both look at the end result and ignore the steps in between.

    #928 Reply
    Justin Bryant

    Re Ramsay (potentially in taxpayer’s favour to ignore transaction(s)) see: https://www.taxjournal.com/articles/taxpayer-pleads-anti-avoidance-rule-or-ramsay-50021

    HMRC seem to accept this as follows from para 26 of the case in the link below:

    “…He confirmed that, consistently with that submission, HMRC do not contend that the closure of Option 2 on 7th April gave rise to a chargeable gain even if Mr Schofield were then resident in the United Kingdom”


    See also: http://www.bailii.org/uk/cases/UKSPC/2008/SPC00718.html

    #929 Reply
    Justin Bryant

    See here another potentially useful recent reverse Ramsay case:


    #1634 Reply
    Nicky Foster

    Has anyone had an update in this regard – almost a year to the day following the first HMRC letter we have no had another upholding the HMRC position that the CDP scheme resulted in two transactions rather than one.

    #1639 Reply
    AJ Mussell

    Nicky, I am not aware of any developments with this type of scheme and am still of the view that only one lot of SDLT would be upheld by the tax tribunal. What has happened with your appeal if anything?

    #1641 Reply
    Nicky Foster

    HMRC have issued two letters:

    First Land Transaction (the Freehold):
    HMRC have come back saying that no argument was put forward in respect of the first land transaction and that SDLT on the purchase price of this first transaction remains payable. They have indicated that they will issue an enquiry closure notice and have requested payment plus interest in this regard but no penalties.

    Second Land Transaction (Leasehold):
    In respect of the second land transaction – the grant of the leasehold having reviewed our & others assertion that no SDLT is payable on this transaction they have come back with the following:
    1. Detail of the second land transaction – The avoidance scheme involved two successive transactions. The documents show that a partnership was interested into with a company and a lease of the property was granted to the partnership. The chargeable consideration i.e. the amount paid for the lease was the amount of the premium shown in the contract
    2. Was the lease completed? – It has been stated that as you landlord (in capacity as a partner in the partnership) signed the lease and the partnership documents and the company itself did not sign these documents. It is therefore argued that the lease was not complete and the partnership never came into existence. It is a matter of fact that you signed the lease and it appears that the intention was for the lease signed by you and the company to be executed in counterparts. This means that both you (as landlord) and you and the company (as the tenant) would sign and exchange the lease documents. Your land transaction return was made to HMRC on the basis that there was a partnership and that granting of a lease was completed: that is the basis on which you stated that no SDLT was due. HMRC has not seen any evidence to show that the lease was not completed.
    3. Was the lease substantially performed? It has been put forward that not only did completion not take place, the lease was not “substantially performed”. This means that, although you took possession of the property by virtue of acquiring the freehold, funds for the lease premium were not paid. The document which explains how the avoidance scheme was supposed to work called the “protocol for implementing SDLT planning” and shows that there would be a transfer of money from you to the solicitors of the partnership (is the partnership did exist) for the premium of the lease. This appears to be a circular payment, happening before the lease is granted (and before the freehold is acquired); the money is then returned to you so that you can pay for the freehold. If this movement of monies did actually take place, then this may amount to substantial performance of the lease. HMRC has not seen any evidence to suggest that this movement of monies did not take place.
    4. Was there a partnership or joint ownership? From the facts presented and the law concerning partnerships, it is questionable whether there was ever truly a partnership in existence. It is not clear what business the partnership was carrying out. This being the case, it is arguable that based on the facts, the arrangement put in place was a joint ownership of property rather than a partnership. The scheme used by you provided for a premium to be paid on the grant of the lease which was an amount equal to the price paid for the freehold (the first land transaction). It appears that you and the company is accepted as joint purchasers, would be joint and severally liable for SDLT that arises on the grant of the lease.
    5. If there was a partnership – if you continue to contend that there was a partnership in place, SDLT would be payable under the special partnership rules. You were the relevant and also the corresponding partner and the SDLT lies with you.
    HMRC remains of the view that SDLT is payable on the second transaction .

    Next steps if in disagreement would be to ask to have the decision independently reviewed or notify appeals against BOTH SDLT charges and go to an independent tribunal

    1. SDLT on the first land transaction – is there any reason not to pay this at this juncture? Does payment of this amount plus interest prevent/jeopardise in any way continued defence of the second transaction as not valid and that substance over form only one transaction took place?
    2.Can one contest any of the interest charged given that its taken HMRC over a year to come back?
    3. Do you have to notify appeals against both SDLT charges and go to tribunal as suggested by HMRC can one pay the first transaction but take the second transaction to tribunal?
    4.Is a tribunal a matter of public record and does this bring this matter into the public domain? Are you aware of any other clients used this scheme progressing to tribunal?
    5. In general what would you advise as next steps?

    As ever your thoughts are most welcomed

    #1649 Reply
    AJ Mussell

    Nicky, in answer to your questions:

    1. If you wish to pay then I would lodge the SDLT under cover of a letter stating that the payment is made without prejudice and is made in respect of the entire matter and only in order to stop interest running.
    2. No the interest is not contestable and is payable on the tax ultimately found to be due.
    3.It would be safer to appeal both transactions as you do not wish to settle the first one and then be unsuccessful with the second.
    4. The hearing is a matter of public record and i am not aware of any other live appeals in this type of scheme but that is not to say there aren’t any.
    5. As far as next steps go I think you need a specialist barrister to review the case documentation in detail and advise you on the merits of an appeal and I think this forum is not really the appropriate place for that sort of detailed advice.

    Do let me know if I can assist you further off-line as it were.

    #1650 Reply
    Nicky Foster

    Many thanks for your response will give some consideration and be in touch in due course

    #3674 Reply
    Drew Timmons

    Hi Patrick,

    I note your reference to the Ramsay principle as a defence here.

    One of the other chaps – Mr Bryant – refers to ‘reverse Ramsay’ and provides some authorities though I cannot see how they apply. Is there an authority for the reverse Ramsay principle. For example in the case being discussed in this thread where the artificial scheme has created two tax charges?


    #3677 Reply
    AJ Mussell

    Drew, I understand the “reverse Ramsay” point to mean basically that if you apply the Ramsay principle to the two step scheme you collapse it so that there is only one tax charge. It’s the same result as applying the “Ramsay” principle as enacted in section 75A where you distil the scheme down to one sale from V to P. Ramsay is a principle of statutory interpretation so it applies regardless of whether HMRC wish to or not. There are now appeals in before the tax tribunal over the legitimacy of the second charge and some may be heard later this year.

    #3695 Reply

    Latest case with reverse Ramsay commentary (re s75A) is at para 186 here:

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