Consideration is the cash payment, not the annuity

The taxpayers entered into a contract to buy a residential property for £765 000 and paid a 5% cash deposit. The contract stated that the taxpayers pay the balance by issuing an annuity to the sellers which they did. The annuity was redeemed and released before completion. Then on completion the sellers received a cash sum of £726 750 – the balance of the purchase price.

The taxpayers filed their stamp duty land tax return before completion on the basis that the consideration for the purchase was the 5% deposit plus 12 times the annual amount of the annuity so no stamp duty land tax was payable (FA 2003 s 52).

HMRC disagreed and issued a discovery assessment for the tax plus interest and a joint penalty. The First-tier Tribunal found for HMRC so the taxpayers appealed to the Upper Tribunal.

The Upper Tribunal decided...