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DV3 RS Ltd Partnership v CRC, Court of Appeal
A company entered into a contract with L&G to buy an interest in head leasehold of a property in Regent Street, London, for £65.1m. A scheme was arranged to avoid paying stamp duty land tax (SDLT) on the transaction.
The taxpayer, a limited partnership, was formed in the British Virgin Islands and a contract of subsale made on 30 November between the company and the partnership.
The company agreed to sell the head leasehold interest to the partnership for £65.1m. Two separate transactions took place as a result of the scheme: the sale to the company by L&G, and the sale to the taxpayer by the company.
HMRC said the partnership was liable for SDLT on the acquisition of the property. The partnership appealed, claiming the subsale fell within FA 2003, s 45 and Sch 15 para 10, as a result of which no tax was due.
The First-tier Tribunal decided in favour of the taxpayer, and the Upper Tribunal upheld that decision. The Revenue appealed.
The Court of Appeal said the contract between L&G and the company was the original contract, while the contract between the company and the taxpayer was a secondary contract. The original contract had completed at the same time as that of the secondary contract. In the circumstances, s 45(3) provided that the completion of the original contract had to be disregarded. The company therefore had not acquired a chargeable interest by entering into the contract with L&G.
Section 44(3) applied to the taxpayer’s acquisition of the interest in the property when the second transaction took place. Schedule 15 para 10 did not apply because the company did not acquire a chargeable interest in the property. The taxpayer could not claim the exemption and was liable to SDLT.
HMRC’s appeal was allowed.
