The Upper Tribunal has upheld the decision of the First-tier Tribunal to allow the taxpayer to retain £1.92m of Stamp Duty Land Tax (SDLT).
The background facts were relatively complicated but the issue at stake was simply whether the taxpayer (Christian Candy) could recover SDLT paid by him following substantial performance of an agreement for lease entered into by him which was ultimately not carried into effect. The taxpayer's obligations and liabilities under the agreement were extinguished when the relevant agreement was novated to his brother.
In a previous case, the taxpayer had already sought to recover the SDLT from HMRC under section 44(9) Finance Act 2003 (FA 2003). This section provides that SDLT paid following substantial performance of an agreement can be reclaimed, provided the reclaim is made by amendment to the land transaction return submitted to HMRC and such amendment is made within twelve months of the filing date of the transaction. In that case, the Court of Appeal determined that recovery of the SDLT was not possible as the repayment claim had not been made within the required twelve months.
At the same time as making a claim for repayment of the SDLT under section 44(9), the taxpayer also applied for repayment of the SDLT in the alternative under paragraph 34, Schedule 10, FA 2003. This paragraph applies where: (a) a person has paid an amount by way of SDLT but believes that the SDLT was not due; or (b) a person has been assessed as liable to pay an amount by way of SDLT, or there has been a determination to that effect, but the person believes that the SDLT is not due. The time limit for claims under paragraph 34 is four years from the relevant effective date and it is subject to restrictions contained in paragraph 34A, Schedule 10, FA 2003.
HMRC argued that section 44(9) prevented a repayment of the SDLT under paragraph 34 because a repayment was only possible by way of an amendment to an SDLT return which had to be done within the required time limits.
Counsel for the taxpayer said that paragraph 34 was a stand-alone provision, unaffected by section 44(9) and designed to provide a 'back-stop remedy' where tax had been overpaid and repayment of the SDLT could not be claimed on any other statutory basis. The taxpayer's claim under paragraph 34 had been made within the four-year time limit and counsel said that none of the restrictions in paragraph 34A applied. On this basis, counsel argued that the taxpayer should be entitled to repayment of the £1.92m.
The First-tier Tribunal agreed with the taxpayer and HMRC appealed.
The Upper Tribunal, like the First-tier Tribunal used both the explanatory notes to the Finance (No.2) Bill 2010 which introduced paragraph 34 and the technical note which introduced for comment the draft legislation which became paragraph 34, to aid in the statutory interpretation of that paragraph. HMRC argued that the wording of section 44(9) was clear and unambiguous and it was not therefore necessary to look further unless the interpretation was absurd. The Upper Tribunal found that the requirement in section 44(9) concerning repayment claims was procedural only and that overpayment relief in paragraph 34 was a separate relief with its own requirements, procedures and time limits, the operation of which were not precluded by section 44(9). The fact that the taxpayer had missed the 12 months deadline for amending his SDLT return, did not, based on the facts of this matter prevent him from claiming relief for the overpaid SDLT pursuant to paragraph 34.
Given the amount of SDLT at stake and the fact that this ruling, if left unchallenged may open the door to other repayment claims previously not thought possible, it remains to be seen whether HMRC will accept this ruling or appeal it.
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