Landlord loses ‘unfair’ £70.5k stamp duty case

The owner of an Essex property has lost his appeal over a claim for £70,500 in higher stamp duty, claiming HMRC failed to take the “human element” into account.

The dispute concerned a closure notice from HMRC for a £70,500 higher stamp rate land tax (SDLT) claim relating to the acquisition of a residential property in Hornchurch.

The first-tier tribunal ruled that the appellant Mayfair Avenue Limited, represented by sole director Yasir Ali at the hearing, was an ineligible person occupying the property and was liable to pay a higher rate of SDLT.

The property in question had been Yasir Ali’s family home for over a decade and he was the sole director of Mayfair Avenue Limited, a company he established in April 2021 to purchase the property when its buyer withdrew of a chain.

This was because Ali had put the house on the market earlier in the year and found a buyer who subsequently fell through.

Rather than lose the new house the family was planning to buy, Ali decided to transfer the property into a limited company, following the advice of his mortgage broker.

This was duly done and Mayfair Avenue Ltd was formed on 21 April 2021 with Ali as sole director.

On 30 June 2021, the company acquired the Mayfair Avenue property from Ali for £650,000. The SDLT return was submitted on the same day and £27,000 of SDLT was paid.

Ali and his family stayed in the house while work was completed on his new property and they moved in on May 13, 2022.

On 2 March 2022, HMRC opened a compliance review of the SDLT return and a closure notice was issued on 25 May under Schedule 4A of the Finance Act 2003 (FA 2003). Ali disputed the accusation and appealed to the court.

In court, Ali represented himself and argued that the law was “deficient because it does not provide for a grace period or the possibility of discovering that the SDLT amount is so high”.

He added that “he did not know this applied otherwise he would never have stayed in the property”, pointing out that he had paid rent to Mayfair Avenue Ltd for the period the family remained in the property. House.

Ali also said HMRC had unfairly failed to “take into account the human element” and that “the tax should not be there to surprise people”.

HMRC’s lawyer, Kate Birtles, rejected his arguments, saying the notice of investigation was validly issued because it was within the nine-month time limit and the 15% higher SDLT rate for certain transactions set by paragraph 3 of Schedule 10 of the FA 2003 applied. .

This is because the transaction consisted entirely of taxable interest on a single dwelling, the value exceeded £500,000 (i.e. £650,000) and it was a high value residential transaction purchased by a business.

Ali was the sole director and shareholder of the appellant company and, as such, controlled Mayfair Avenue Limited. He was therefore a connected person and an ineligible natural person for the purposes of paragraph 5 of Schedule 4A of the FA 2003.

Ruling in favor of HMRC, Tribunal Judge McGregor said: “This means that the 15% SDLT rate applied to the transaction. We find that HMRC correctly calculated the SDLT due on the transaction, giving rise to a closure notice for additional SDLT of £70,500.

“Mr Ali asked us to look at the issue from different angles. Unfortunately, any deficiency in the law resulting from the lack of a grace period is outside the jurisdiction of this court. Only Parliament can change the law.”

Tribunal Judge McGregor and Simon Bird also considered the issue of the “fairness” of the levy, but said none of the court’s powers “provide discretionary relief or mitigation on grounds of fairness.” We therefore find that the statutory powers do not allow us to consider fairness.”

The appeal was dismissed.