Share this content

Interesting SDLT subsale case

Didn't find your answer?

This was very similar to the Vardy scheme and identical to the Geering scheme, but the judge (quite rightly) trashes the Vardy decision and does not even mention Geering (which is unsurprising as it was a pretty poor and badly worded judgment) and just relies on one small word "for" per para 70 and justifies that with a rather dubious/tenuous looking analogy with para 1 Sch 4 FA003 in para 73.

There is a novel (and correct looking) point in the taxpayer’s favour re "wrong" s75A HMRC determinations. The taxpayer only lost due to a rather stretched looking (beyond breaking point in my view) and very novel interpretation of s45 by the judge re the consideration given by the subpurchaser as comprising the share subscription money (a rather extreme Ramsay interpretation, which is probably wrong* and notably the judge gives no case law justification for his very novel view here).

*There is no special rule of interpretation for tax purposes and a transaction cannot automatically be reanalysed because it occurs for tax mitigation purposes: see Mayes v HMRC [2011] EWCA Civ 407 [2011] STC 1269 per Mummery LJ, at p 1287 paras 74-75 and p 1288 para 77, Toulson LJ, at para 107-108, and Barclays Bank v Mawson [2005] 1 AC 684 at p 696 para 36-38 per Lord Nicholls. The amendments made by the Finance Act 2012 were directed at a different arrangement and it is therefore not surprising that they are not applicable. So for example in Project Blue Limited v HMRC [2014] UKUT 0564 (TCC) Morgan J, at para 44, stated that it was agreed that the combined effect of s 45 and s 71A FA 2003 was to prevent any SDLT charge arising even though this was clearly not intended. It was also clear that the drafting error was the failure to make an exception in s 45(3) for cases where s 71A applied. However, he did not consider an exception could, as a matter of construction, be implied into s 45 to impose an SDLT charge where it would otherwise not arise. Note also HMRC’s willingness and success in relying on the literal wording of legislation to impose what the relevant judges consider to be  unjust tax charges: see e.g. Joost Lobler v HMRC [2013] UKFTT 141 (TC) at paras 24-28 and Collins v Addies [1992] STC 746 at p 750 per Glidewell LJ.

This view of s 45 was fully endorsed by the Supreme Court in Project Blue, which was very clear at paras 34, 37 and 313, that s 45 was defective, in that it contained ‘lacunas’ which enabled an ‘unexpected tax holiday’, thus confirming that the Ramsay purposive interpretation of tax legislation had no application to s 45. Furthermore, the Barclays Bank v Mawson case was cited with approval by Lord Hodge in paras 34 and 44 of his judgement in Project Blue.

Also, paras 28 & 37 of DV3 seem to counter the judge's s45 “consideration given” by the subpurchaser point:

In other words, if that consideration paid by the p-ship to the company was just £1 or was otherwise exempt, then no SDLT would have been payable in DV3 and in this case the exempt dividend is analogous, so should cause no SDLT for the subpurchaser. (The test for consideration is fundamentally the same in Schedule 2A FA 2003.)

Also, obviously “simultaneous” = “at the same time”, yet HMRC argued a scintilla temporis applied to cause a problem in this VAT case on more or less the same wording as in s45:

Replies (0)

Please login or register to join the discussion.

There are currently no replies, be the first to post a reply.

Share this content