Nov 3
The taxpayer entered into a contract for the assignment of a lease of a house. The taxpayer's builders started work on the property, which was enough to constitute the taking possession of it, which in turn was sufficient to be “substantial performance” of the contract. Under section 44(4) of the Finance Act 2003, substantial performance triggered an initial liability to stamp duty land tax (“SDLT”), which the taxpayer paid. The first sentence of section 44(9) of the Act provided a mechanism for the repayment of the tax where the contract was afterwards rescinded or annulled or for some other reason not carried into effect. The agreement for the assignment of the lease having not been carried into effect, the taxpayer made an application to the revenue for the repayment of the SDLT under section 44(9) by amending the SDLT return that related to the agreement. The revenue rejected the amendment on the ground that it did not comply with paragraph 6(3) of Schedule 10 to the 2003 Act, which provided that except as otherwise provided, an amendment to a land transaction return could not be made more than 12 months after the filing date. On the taxpayer's appeal, the First-tier Tribunal held that (i) the words “except as otherwise provided” in paragraph 6(3) had to refer to some provision elsewhere in the Act which provided for an exception, and the only candidate was the word “afterwards” in section 44(9); (ii) “afterwards” meant that the right to repayment arose where, at any time following substantial performance, the contract was not carried into effect, with the result that (iii) the 12-month time limit in paragraph 6(3) did not apply in the case of an amendment of an SDLT return made for the purpose of making a claim under section 44(9). The Upper Tribunal (Tax and Chancery Chamber) allowed the revenue’s appeal, holding that the 12-month time limit for amending land transaction returns in paragraph 6(3) applied to an amendment of a SDLT return made for the purpose of making a claim under section 44(9. The taxpayer appealed.
On the appeal—
Held, dismissing the appeal, that, having regard to the anti-avoidance purposes of the legislation and to the legislative history, section 44(9) of the Finance Act 2203 did not operate as an exception to the generally applicable time limit imposed by paragraph 6(3) of Schedule 10 to the Act for amending land transaction returns. The First-tier Tribunal had erred in assuming that the term “except as otherwise provided” in paragraph 6(3) of Schedule 10 necessarily had a substantive legal effect and had to refer to another provision in the Act. Furthermore, on a true construction, the word “afterwards” in section 44(9) simply indicated that the contract had been later or subsequently or afterwards rescinded or annulled. The first sentence of section 44(9) afforded a taxpayer an unqualified, substantive right to repayment of SDLT, while the second sentence made clear that repayment had to be claimed by amendment of the land transaction return. If Parliament had intended the word “afterwards” to have the significant effect of disapplying the generally applicable time limit, it would have been expressed as applying to both limbs. It followed that the he word “afterwards” did not provide an (otherwise unarticulated) exception to the time limit generally applied by paragraph 6(3) for making amendments. It had nothing to do with time limits at all. Rather, once the duty to repay arose, the second sentence of section 44(9) required a claim to be made by way of amendment of the original return. That could only be done in the period specified by paragraph 6(3) of Schedule 10 (paras 37, 41–54, 62, 63, 64).
Michael Thomas and Quinlan Windle (instructed by Joelson LLP) for the taxpayer.
Imran Afzal (instructed by Solicitor, Revenue and Customs) for the revenue.