SDLT relief not due on planning permission aloneby
Two appeals sought to determine whether planning permission was capable of satisfying the condition for dwellings being “in the process of construction” in order for multiple dwellings relief (MDR) to apply.
The two appeals: Ladson Preston Ltd and AKA Developments Greenview Ltd were heard together at the FTT as case TC08197.
Each appeal had a lead appellant with a group of appeals standing behind it, as the argument of using planning permission to qualify for the relief had been discussed in the industry for some time, and as such they were treated as test cases.
In both cases, planning permission had been granted prior to the effective date of the transaction (EDT) for the construction of multiple dwellings but no dwellings yet stood. After the EDT, each taxpayer had constructed the dwellings in accordance with the granted planning permission.
The two cases considered situations where:
- No dwellings were built at the EDT; and
- Some ‘construction’ works had begun before the EDT.
The purchase consisted of bare land with the benefit of planning permission for 218 flats and commercial space on the ground floor. The point of contention was that planning permission is the start of the construction process, therefore, the flats were in the process of being constructed at the EDT.
For MDR to apply the main subject matter must consist of the transfer of an interest in more than one dwelling.
Planning permission does not have a property title and it is not a right held by one person. Hence, it is not something that a person can own, or that can be sold or transferred by one person to another. As such planning permission cannot be acquired from the seller by the purchaser as part of the subject matter of a land transaction on which SDLT is payable.
If planning permission triggered MDR it could result in abuse as purchasers could submit planning permission for a potential site, benefit from the application of the relief and subsequently change their intention and not erect the dwellings.
Furthermore, planning permission is a non-physical activity, as such, other non-physical activities could trigger relief. For example; architect’s plans, contracts which have been concluded with suppliers or sub-contractors for the building project, or secured finance for a project.
The FTT concluded that as planning permission is not something that can be transferred. Other non-physical activities relate to a buyer’s own plans and arrangements and are similarly not something that is acquired by a purchaser.
The main subject matter of the transaction did not include an interest in more than one dwelling so Ladson Preston was denied relief.
AKA Developments Greenview
The purchase consisted of commercial buildings which were to be demolished to ground level and 9 dwellings were to be constructed. This case relies on the principals in the Ladson case and the ‘construction’ works performed before and on the day of EDT.
The works consisted of bore holes dug prior to the EDT and works were performed on the day to remove the existing buildings. The argument was that the dwellings were under construction on the EDT, since the EDT is the day of completion, not the time of completion.
Bore holes are similar to the non-physical activities discussed in the Ladson case as title to them cannot be transferred between parties. As such, the bore holes cannot be characterised as the main subject matter of the transaction.
Works undertaken after the transaction is completed cannot have formed part of the subject matter of the transaction, even if performed on the very day of the EDT.
The main subject matter of the transaction did not include an interest in more than one dwelling so AKA Developments Greenview was denied relief.
Points to take away
If a dwelling is in the process of being constructed for the SDLT relief to apply, the main subject matter of the transaction must be an interest in more than one dwelling. This means works must be substantially performed before an unbuilt dwelling comes into existence for the relief.
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Natasha Heron is a Tax Manager specialising in property taxes at accountants Hillier Hopkins. She can be reached by email: [email protected].
Hillier Hopkins is a firm of chartered accountants and tax advisers. The firm provides tax advisory and accountancy services to...