Sub-sale scheme deemed ineffective

In 2011 the taxpayer entered into a contract to buy a residential property for £325 000 (the original contract). He then contracted to sub-sell the property for £10 000 to a trust of which the taxpayer was the settlor and a beneficiary (the sub-sale contract). The sub-sale was to complete in 124 years but the payment of the £10 000 was made to the taxpayer at the same time as the original contract was completed. As a result the sub-sale contract was substantially performed.

The aim of the arrangement was to take advantage of sub-sale relief under FA 2003 s 45 which would have disregarded the original contract so that SDLT would have been payable only on the £10 000 consideration which passed under the sub-sale contract.

HMRC said the scheme was ineffective saying s 45 did not apply as contended for by the taxpayer ...