Afshin Sajedi & Ors v The Commissioners for HMRC [2025] UKFTT 297 (TC)

[2025] UKFTT 00297 (TC)Case No TC09447
FIRST-TIER TRIBUNAL
TAX CHAMBER
Hearing Heard on: 13 June 2024Date Judgment date: 6 March 2025
Sitting in public in Taylor House, London
Appeal references: TC/2020/04147
TC/2020/04148
TC/2022/12740
TC/2022/12743
TC/2022/12745
TC/2022/12746
STAMP DUTY LAND TAX – Higher rates for additional dwellings – replacement of only or main residence – operation of commencement provisions - meaning of ‘disposes’
Before
TRIBUNAL JUDGE MALCOLM FROSTNOEL BARRETT
Between
AFSHIN SAJEDI, AKRAM RAFIE, PHILLIP HALL AND TRUSHA PILLAYAppellantTHE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondentEdward Hellier, of counsel, instructed by Landstar Accountancy Ltd for AppellantKevin Brooke, litigator of HM Revenue and Customs’ Solicitor’s Office for RespondentsDECISION

Introduction

[1]This matter relates to a number of consolidated appeals against closure notices issued by HMRC in respect of Stamp Duty Land Tax (“SDLT”).[2]The substance of the appeals relates to the higher rates of SDLT that apply to the acquisition of a ‘second home’. The appellants contend that the provisions relating to the replacement of a purchaser’s only or main residence are engaged, resulting in the higher rates being inapplicable.[3]For the reasons set out below, the appeals are dismissed. We are not persuaded that there has been a replacement of an only or main residence.

Background facts

[4]This decision covers two separate property acquisitions:(1) one carried out by Mr Hall (“PH”) and Ms Pillay (“TP”) (the acquisition of “The Manor House”), and(2) one carried out by Mr Sajedi (“AS”) and Ms Rafie (“AR”) (the acquisition of the “Prestbury Road” property).[5]The two matters have been joined as they concern the application of the same statutory rules.[6]Prior to the present hearing, there were some initial procedural disagreements between the parties as to whether the appeals had been brought at the right time and against decisions which could be properly appealed.[7]This point was resolved prior to the matter coming before us, such that the only appeals to be determined are the appeals with references TC 2022/12740 (Mr Sajedi), TC/2022/12743 (Ms Rafie), TC/2022/12745 (Mr Hall), and TC/2022/12746 (Ms Pillay). These have been referred to in correspondence as the ‘Tranche Three’ appeals. The remainder of the appeals are withdrawn.[8]The documentary evidence before the Tribunal consisted of a document bundle of 311 pages. No witness evidence was put before the Tribunal. The parties provided a statement of agreed facts.

The Manor House

[9]On 19 May 2017 PH and TP acquired The Manor House for £3,600.000.[10]On the same day HMRC received PH and TP’s land transaction return in respect of the purchase. SDLT of £453,750 was paid in respect of the conveyance, including the higher rates for additional dwellings. This amount was subsequently reduced to £367,500 via a successful multiple dwellings relief claim dated 14 November 2017[11]On 11 May 2020 a TR1 transfer form was completed by PH and TP in relation to a property at New Crane Wharf, Wapping (“New Crane Wharf”). The TR1 lists as transferor:
“Phillip James Hall and Trusha Pillay”
[12]and as transferee (with the line breaks as per the original):
“Phillip James Hall Trusha Pillay”
Trusha Pillay”[13]Box 8 of the TR1 related to consideration. It stated:
“the transferor has received the sum from the transferee for the property the following sum (in words and figures) nineteen thousand pounds zero pence (£19,000).”
[14]In Box 10 of the TR1 it was stated that:
“Declaration of Trust. The transferee is more than one person and they are to hold the property on trust: They will hold the property as tenants in common in unequal shares in the following proportions 49% to Phillip James Hall 51% to Trusha Pillay”
[15]Given the entries in the transferor and transferee boxes both contained the names of PH and TP, it is not entirely clear from whom £19,000 was said to have been paid, and to whom.[16]However, we understand that the TR1 was intended to document a severing of a previous joint tenancy of New Crane Wharf into a tenancy in common, with £19,000 said to have transferred from TP to PH in consideration of PH transferring 1% of his interest to TP.[17]On 3 July 2020, PH and TP’s agent wrote to HMRC seeking to amend PH and TP’s SDLT return and reclaim higher rate SDLT of £108,000. The reclaim was on the basis that the Manor House was a replacement for a main residence.[18]Correspondence then ensued between HMRC and PH and TP’s agents. For present purposes it is sufficient to note that HMRC opened enquiries into claims for overpayment relief and subsequently closed those enquiries stating their conclusion that no repayment of SDLT was due.[19]The present appeal relates to those closure notices.

Prestbury Road

[20]On 5 June 2017 AS and AR acquired Prestbury Road, for £2,413,800.[21]On 3 July 2017 HMRC received AS’ and AR’s land transaction return. SDLT of £275,820 was paid in respect of the conveyance, including the higher rates for additional dwellings. This amount was subsequently reduced to £201,294 via a successful multiple dwellings relief claim.[22]On 16 May 2020 a declaration of trust was entered into by AR and AS in relation to a property on Calderbrook Drive, Cheadle Hulme, Cheshire (“Calderbrook Drive”).[23]The declaration of trust provided as follows:(1) AS was described as the Trustee and AR as the Beneficiary.(2) AS was sole legal and beneficial owner of Calderbrook Drive.(3) AS was to hold Calderbook Drive on trust for himself and AR as beneficial tenants in common in the following proportions: AS 99% and AR 1%.[24]On 26 May 2020 AS and AR’s agent submitted an SDLT16 form to claim back the higher rate SDLT paid in respect of Prestbury Road.[25]As with The Manor House, correspondence then ensued, the net effect being that HMRC have issued closure notices rejecting overpayment claims (in the same terms as in relation to the Manor House) and the present appeal relates to those closure notices.[26]In each case there has been an acquisition of a new property as well as a transaction in relation to an existing property. We have referred to the properties as the “New Properties” (the Manor House and Prestbury Road) and “Existing Properties” (New Crane Wharf and Calderbrook Drive) throughout.

The legislation

[27]FA 2003 Sch 4ZA provides for higher rates of SDLT for additional dwellings and dwellings purchased by companies. Legislative references are references to that schedule, unless stated otherwise.[28]Paragraph 1 applies a higher rate of SDLT to certain transactions described as “higher rates transactions”. Paragraph 1 provides (so far as is relevant):(1) In its application for the purpose of determining the amount of tax chargeable in respect of a chargeable transaction which is a higher rates transaction, section 55(amount of tax chargeable: general) has effect with the modification in sub-paragraph (2).(2) [this subparagraph imposes increased rates for the purposes of computing SDLT by substituting a modified set of rates into section 55 FA 2003][29]Paragraph 2 provides the meaning of “higher rates transaction” and states (so far as is relevant): 2 Meaning of “higher rates transaction” etc. (1) This paragraph explains how to determine whether a chargeable transaction is a “higher rates transaction” for the purposes of paragraph 1. … (3) In the case of a transaction where there are two or more purchasers— (a) take one of the purchasers and determine, having regard to that purchaser only, whether the transaction falls within any of paragraphs 3 to 7, and (b) do the same with each of the other purchasers. If the transaction falls within any of those paragraphs when having regard to any one of the purchasers it is a “higher rates transaction” (otherwise it is not).”[30]Paragraph 2(3) therefore requires consideration of paragraphs 3 to 7. It is paragraph 3 that is relevant to the present appeal. Paragraph 3 provides (so far as is relevant): “3 Single dwelling transactions(1) A chargeable transaction falls within this paragraph if— (a) the purchaser is an individual, (b) the main subject-matter of the transaction consists of a major interest in a single dwelling (“the purchased dwelling”), and (c) Conditions A to D are met. [(1A) But sub-paragraph (1) is subject to paragraph 7A.](2) Condition A is that the chargeable consideration for the transaction is £40,000 or more.(3) Condition B is that on the effective date of the transaction the purchased dwelling— (a) is not subject to a lease upon which the main subject-matter of the transaction is reversionary, or (b) is subject to such a lease but the lease has an unexpired term of no more than 21 years.(4) Condition C is that at the end of the day that is the effective date of the transaction— (a) the purchaser has a major interest in a dwelling other than the purchased dwelling, (b) that interest has a market value of £40,000 or more, and (c) that interest is not reversionary on a lease which has an unexpired term of more than 21 years.(5) Condition D is that the purchased dwelling is not a replacement for the purchaser's only or main residence.(6) For the purposes of sub-paragraph (5) the purchased dwelling is a replacement for the purchaser's only or main residence if— [not relevant to the present appeal](7) For the purposes of sub-paragraph (5) the purchased dwelling is also a replacement for the purchaser's only or main residence if— (a) on the effective date of the transaction (“the transaction concerned”) the purchaser intended the purchased dwelling to be the purchaser's only or main residence, (b) in another land transaction whose effective date is during a permitted period, the purchaser or the purchaser's spouse or civil partner disposes of a major interest in another dwelling (“the sold dwelling”), [(ba) immediately after the effective date of that other land transaction, neither the purchaser nor the purchaser's spouse or civil partner has a major interest in the sold dwelling,] and (c) at any time during the period of three years ending with the effective date of the transaction concerned the sold dwelling was the purchaser's only or main residence. (a) the purchaser is an individual, (b) the main subject-matter of the transaction consists of a major interest in a single dwelling (“the purchased dwelling”), and (c) Conditions A to D are met. (a) is not subject to a lease upon which the main subject-matter of the transaction is reversionary, or (b) is subject to such a lease but the lease has an unexpired term of no more than 21 years. (a) the purchaser has a major interest in a dwelling other than the purchased dwelling, (b) that interest has a market value of £40,000 or more, and (c) that interest is not reversionary on a lease which has an unexpired term of more than 21 years. [not relevant to the present appeal] (a) on the effective date of the transaction (“the transaction concerned”) the purchaser intended the purchased dwelling to be the purchaser's only or main residence, (b) in another land transaction whose effective date is during a permitted period, the purchaser or the purchaser's spouse or civil partner disposes of a major interest in another dwelling (“the sold dwelling”), [(ba) immediately after the effective date of that other land transaction, neither the purchaser nor the purchaser's spouse or civil partner has a major interest in the sold dwelling,] and (c) at any time during the period of three years ending with the effective date of the transaction concerned the sold dwelling was the purchaser's only or main residence.[31]The primary point of contention between the parties is whether or not subparagraph 3(7)(ba) above applies to the transactions under appeal. We are also to determine whether the other requirements of subparagraph 3(7) are met.[32]Subparagraph 3(7)(ba) was inserted by Finance Act 2018 (“FA 2018”) s 40 and Sch 11. The commencement provisions for that schedule are therefore of importance to the dispute as to whether subparagraph 3(7)(ba) applies.[33]The relevant commencement provisions are set out in FA 2018 Sch 11 paragraph 16, which provides:
“(1) The amendments made by this Schedule (other than those made by paragraphs 13 and 14(2), (3), (4)(a) and (5)(a)) have effect in relation to any land transaction of which the effective date is, or is after, 22 November 2017. (2) But the amendments made by paragraph 2 do not have effect in relation to a transaction— (a) effected in pursuance of a contract entered into and substantially performed before 22 November 2017, or (b) effected in pursuance of a contract entered into before that date and not excluded by sub-paragraph (3). (3) A transaction effected in pursuance of a contract entered into before 22 November 2017 is excluded by this sub-paragraph if— (a) there is any variation of the contract, or assignment of rights under the contract, on or after 22 November 2017, (b) the transaction is effected in consequence of the exercise on or after that date of any option, right of pre-emption or similar right, or (c) on or after that date there is an assignment, subsale or other transaction relating to the whole or part of the subject-matter of the contract as a result of which a person other than the purchaser under the contract becomes entitled to call for a conveyance” (a) effected in pursuance of a contract entered into and substantially performed before 22 November 2017, or (b) effected in pursuance of a contract entered into before that date and not excluded by sub-paragraph (3). (a) there is any variation of the contract, or assignment of rights under the contract, on or after 22 November 2017, (b) the transaction is effected in consequence of the exercise on or after that date of any option, right of pre-emption or similar right, or (c) on or after that date there is an assignment, subsale or other transaction relating to the whole or part of the subject-matter of the contract as a result of which a person other than the purchaser under the contract becomes entitled to call for a conveyance”
[34]Section 83 FA 2003 provides for the formal requirements as to assessments, penalty determinations etc, with further provisions in this respect being contained in Schedule 10. Paragraph 34 of that schedule provides for claims for relief for overpaid tax. Schedule 11A makes provision for claims not included in a return, including (in paragraph 7 of that Schedule) a power for HMRC to enquire into a claim.[35]FA 2003 Sch 11A paragraph 11 provides for the completion of an enquiry into a claim as follows: “11 Completion of enquiry(1) An enquiry under paragraph 7 is completed when the Inland Revenue by notice (a “closure notice”) inform the purchaser that they have completed their enquiries and state their conclusions.(2) A closure notice must either– (a) state that in the opinion of the Inland Revenue no amendment of the claim is required, or (b) if in the Inland Revenue's opinion the claim is insufficient or excessive, amend the claim so as to make good or eliminate the deficiency or excess. In the case of an enquiry into an amendment of a claim, paragraph (b) applies only so far as the deficiency or excess is attributable to the amendment.(3) A closure notice takes effect when it is issued.” (a) state that in the opinion of the Inland Revenue no amendment of the claim is required, or (b) if in the Inland Revenue's opinion the claim is insufficient or excessive, amend the claim so as to make good or eliminate the deficiency or excess.[36]An appeal against a closure notice is dealt with by (among other provisions) paragraph 36D of Sch 10 FA 2003, which provides that, if an appellant notifies an appeal to the Tribunal, the Tribunal is to “decide the matter in question”.

The issues

[37]In the present case, the conclusion in each closure notice was that no refund of SDLT was due.[38]At a high-level, the ‘matter in question’ that is to be determined by this Tribunal is therefore whether a refund of SDLT was due.[39]This question depends on whether the relevant transactions are ‘Higher Rates Transactions’ within the meaning of FA 2003 Sch 4ZA. In turn, this question depends in each case on whether the New Property is a replacement for the purchaser's only or main residence within the meaning of paragraph 3(7).[40]Paragraph 3(7) sets out 4 requirements for a replacement of an only or main residence, in subparagraphs (a), (b), (ba) and (c).[41]The question of whether or not subparagraph 3(7)(ba) applies to the transactions under appeal is the subject of active dispute between the parties, due to a disagreement as to the effect of the relevant commencement provisions.[42]The Tribunal must also determine whether or not the requirements in paragraph 3(7) are met in order to determine the matter in question.[43]As a result, there are two issues that we deal with in turn:(1) Whether or not subparagraph 3(7)(ba) applies to the transactions under appeal (the “Commencement Issue”)(2) Whether the requirements of paragraph 3(7) are met (the “Substantive Requirements Issue”)

The Commencement Issue

[44]The question to be answered in relation to this issue is whether or not the commencement provisions in FA 2018 Sch 11 paragraph 16, apply to the current facts so as to include paragraph 3(7)(ba) as one of the substantive requirements to be considered.[45]It is common ground between the parties that if paragraph 3(7)(ba) applies then the appeals will fail.[46]The relevant commencement provisions operate by bringing into force paragraph 2 of Sch 11 to FA 2018 (hence the references to paragraph 2 in the below legislation). The commencement provisions provide:
“16 (1) The amendments made by this Schedule (other than those made by paragraphs 13 and 14(2), (3), (4)(a) and (5)(a)) have effect in relation to any land transaction of which the effective date is, or is after, 22 November 2017. (2) But the amendments made by paragraph 2 do not have effect in relation to a transaction— (a) effected in pursuance of a contract entered into and substantially performed before 22 November 2017, or (b) effected in pursuance of a contract entered into before that date and not excluded by sub-paragraph (3). [subparagraph 3 is not relevant to the present appeal]” (a) effected in pursuance of a contract entered into and substantially performed before 22 November 2017, or (b) effected in pursuance of a contract entered into before that date and not excluded by sub-paragraph (3). [subparagraph 3 is not relevant to the present appeal]”
[47]For the Appellants to successfully argue that paragraph 2 Sch 11 FA 2018 was not in force in the present case, they must persuade the Tribunal that either subparagraph 16(1) above is not engaged, or that any application of subparagraph 16(1) is nonetheless disapplied by 16(2)(a) or (b).[48]It can be seen from the commencement provisions that the key date is 22 November 2017. In each case under appeal, we have found that:(1) the New Property was acquired prior to 22 November 2017; but(2) The transaction involving the Existing Property occurred after 22 November 2017.

Submissions of the parties

[49]Mr Hellier, for the Appellants, argues that these commencement provisions are not engaged, as in each case under appeal:(1) The effective date of the purchase of the New Property was before 22 November 2017, such that FA 2018 Sch 11 paragraph 16(1) is not engaged;(2) In any event the purchase of the New Property was “substantially performed” before 22 November 2017, meaning FA 2018 Sch 11 paragraph 16(2)(a) prevents FA 2003 Sch 4ZA paragraph 3(7)(ba) having effect in relation to it; and/or(3) The purchase of the New Property was effected by contracts entered into before 22 November 2017 such that FA 2018 Sch 11 paragraph 16(2)(b) prevents FA 2003 Sch 4ZA paragraph 3(7)(ba) having effect in relation to it.[50]In essence, Mr Hellier says that we should focus entirely on the purchase of the New Property. Because that transaction was completed before the crucial date of 22 November 2017. Mr Hellier argues that the result of each of the paragraph 16 tests above is that the transaction escapes the application of paragraph 3(7)(ba).[51]Mr Hellier contends that this position is unaffected by the fact that the transaction involving the Existing Property occurred after that crucial date.[52]Mr Brooke, for HMRC, contends that the Appellants’ approach is fundamentally flawed, as it is the subsequent transactions in relation to the Existing Properties that prompted the repayment claims in question.[53]Mr Brooke argues that the phrasing of FA 2018 Sch 11 para 16 provided that the relevant amendments have effect in relation to “any land transaction” of which the effective date falls after 22 November 2017. Because the transaction involving the Existing Properties was after that crucial date, and was “any land transaction”, that transaction must be taken into account such that paragraph 3(7)(ba) applies to it.[54]Mr Brooke drew our attention to parts of the explanatory note to FA 2018. Mr Brooke contended that the explanatory note supported HMRC’s view that paragraph 3(7)(ba) was to close a loophole in the legislation whereby, prior to its insertion, the replacement exception in the legislation was being manipulated with claims that transferring ownership of a small proportion of a previous home, even to a spouse, was enough to circumvent the higher rate charge. This was, says Mr Brooke, contrary to the intention of the legislation.[55]Mr Brooke drew our attention to the following parts of the relevant explanatory note: (1) Paragraph 4 provides:
“Paragraph 2 of the Schedule will counteract abuse” (2) Paragraph 9 provides: “Sub-paragraph 2(4) inserts new sub-paragraph 3(7)(ba) into the main Schedule. This will prevent replacement main residence relief being given if the seller, their spouse or civil partner retains a major interest in the old main residence.” (3) Paragraph 34 provides: “34. The main Schedule was inserted into the Finance Act 2003 by section 128 of the 2016 Finance Act. The main Schedule contains legislation to charge higher rates of SDLT when a company buys residential property and when individuals who already own residential property do so. ... 36. The changes will also prevent abuse by requiring the purchaser to dispose of the whole of their former main residence, and to do so to someone who is not their spouse, before benefitting from replacement main residence relief”
[56]Overall, HMRC contend that:(1) It is the date of transaction involving the Existing Property that is key for the purposes of paragraph 3(7)(ba).(2) If this transaction took place after 22 November 2017, which it did in each case, it is irrelevant that the purchase of the New Property took place before 22 November 2017.

Discussion and conclusion on the Commencement Issue

[57]We are inclined to agree with Mr Hellier on this point.[58]As Mr Hellier points out, SDLT is a tax that applies on the acquisition of a chargeable interest. This is made explicit in FA 2003 ss 42 and 43. When SDLT operates it has effect in relation to acquisitions.[59]Section 55 FA 2003 sets out the method by which the amount of the SDLT liability on an acquisition is to be computed. Schedule 4ZA FA 2003 operates by substituting a modified set of rates into section 55 for the purposes of that computation. The effect of paragraph 3(7)(ba) is to insert a new condition as to when Sch 4ZA operates to apply that modified set of rates.[60]The context of the operative provisions of Sch 4ZA is therefore the computation of the SDLT due on an acquisition. The commencement provisions determine which rules are to be followed when performing that computation.[61]The closure notices in dispute are as to the correct tax due on the purchase of the New Properties. It is therefore the SDLT computation on those transactions which we are considering.[62]The commencement provision provides that the statutory amendment “has effect in relation to” land transactions on or after 22 November 2017.[63]The commencement provision therefore provides for a binary test as to whether paragraph 3(7)(ba) is to be considered or not when computing the SDLT due on the purchase of the New Properties. In other words, on a proper construction of the commencement provision, if the purchase of the New Properties falls before 22 November 2017, then the new condition does not fall to be considered at all - it is as if that additional condition simply does not exist.[64]We therefore agree with Mr Hellier that it is only the purchase of the New Properties which is relevant to the application of the commencement provision.[65]HMRC’s approach would effectively require the new condition to be considered in relation to all transactions (whether taking place before or after the commencement date), but with the effect of the condition varying by reference to the effective date of what is referred to in the new condition as the “other land transaction”.[66]We do not consider that this is the correct way to interpret the commencement provision. The commencement provision sets out when a taxpayer needs to consider the new condition, and when they do not, and this test is expressed by reference to the transaction upon which the SDLT is being computed.[67]HMRC’s argument that the amended legislation applies “in relation to any land transaction” incorrectly conflates the test for determining when the provision is to have effect with the actual operation of that provision.[68]In this case we are not looking to determine the SDLT applying to the Existing Property transaction, but the New Property purchase. It is therefore only the New Property purchase that falls to be considered when applying the commencement provision.[69]Mr Brooke also argued that as it was the transactions in relation to the Existing Properties that prompted the repayment claims in question, these later transactions should be the operative ones for the purposes of the commencement provision.[70]We reject his argument. The repayment claim made following each transaction in relation to the relevant Existing Property is not purporting to apply a relief to a previous transaction based on the occurrence of a new one. It is simply recalculating the SDLT due on the previous transaction in the light of new facts.[71]It is true that the output of that computation is different due to the existence of the subsequent transaction, but the statutory language being considered the second time is (and must be) the same as that considered when the return was first submitted.[72]If it were the case that the new condition imposed by paragraph 3(7)(ba) formed a part of a separate provision allowing an application for a refund on the occurrence of a subsequent transaction, there might be some scope for arguing that the relevant commencement provision was intended to operate by reference to that subsequent transaction. However, the legislation is not structured that way.[73]The approach contended for by HMRC would also introduce an element of retrospective effect – modifying the tax due on transactions that had already completed. It would normally be assumed that a statutory provision would not have retrospective effect unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication (see e.g. Wilson and others v. Secretary of State for Trade and Industry [2003] UKHL 40).[74]It would of course be straightforward for the parliamentary draftsperson to introduce a commencement provision which operated in the manner contended for by HMRC. The relevant commencement provision could have been drafted such that the new condition applies by reference to the effective date of what the new condition calls “the other land transaction”, but that is not what was provided for in the statute.[75]We are grateful to Mr Brooke for bringing our attention to the relevant parts of the explanatory note. However, whilst these explain the purpose of the new condition, and how it is intended to counteract abuse, the extracts do not touch upon the commencement provisions.[76]In other words, the explanatory note explains what the new condition was intended to do, but not when it was intended to do it from.[77]We appreciate that it is somewhat surprising that Parliament did not chose to introduce legislation to counteract abusive arrangements in a way that would catch all arrangements where the perceived abusive element occurred after commencement. Instead, the legislation only has effect for transactions taking place wholly after the commencement date. However, the balancing exercise between the desire to avoid retrospective effect and the need to prevent abusive arrangements is one for Parliament.[78]Overall, we decide the Commencement Issue in favour of the Appellants. In our view, the commencement provision requires that we only look to the date of the New Property purchases to decide whether or not paragraph 3(7)(ba) applies to those purchases. As those purchases fall before the key date of 22 November 2017, paragraph 3(7)(ba) does not apply to them.

The Substantive Requirements Issue

[79]We now turn to the question of whether or not the requirements of paragraph 3(7) are met.[80]It is only if all those requirements are met that the Appellants can establish:(1) that the New Properties were replacements for the respective Appellants’ only or main residence;(2) in turn, that Condition D in paragraph 3 does not apply;(3) in turn, that the New Property purchase is not a higher rates transaction.[81]It is therefore an essential element of the Appellants’ appeals that the conditions are all met. If the Appellants are not able to satisfy the Tribunal that all the conditions are met, their appeals must be dismissed.[82]Before we consider those conditions and make relevant findings, we first set out a little of the procedural background

Procedural background

[83]The parties came prepared at the hearing of these appeals to present their respective arguments on a single issue – the Commencement Issue discussed above. This was because HMRC and the Appellants were in agreement that the other conditions were met.[84]Early in the course of the hearing the Tribunal made it clear that the requirements of paragraph 3(7) were mixed questions of fact and law and that, although the parties may agree matters of fact, matters of law were for the Tribunal to determine.[85]The Tribunal asked to be provided with a schedule of agreed facts in order to be able to make determinations as to whether those facts met the statutory description. The parties agreed to the request but no schedule was initially provided.[86]During the hearing the Tribunal reminded Mr Hellier, for the Appellants, on a number of occasions that it was the Appellant’s appeal, and that the burden of establishing all the necessary requirements rested on the Appellants.[87]Despite the warnings from the Tribunal, Mr Hellier proceeded on the basis that no issue fell to be determined apart from the Commencement Issue. Indeed, in the closing stages of the hearing Mr Hellier submitted that there was no other matter the Tribunal could decide and that for the Tribunal to consider any other issue would be going outside its remit.[88]At this point, the Tribunal interrupted Mr Hellier’s submissions to again make it plain that the Tribunal considered that the entire appeal was before us. Mr Hellier then belatedly made an application to provide further submissions after the hearing.[89]We therefore directed that the Appellants provide any further submissions within 21 days of the hearing, with a response from HMRC following after and a further right of reply for the Appellants.[90]In the event, the parties produced a joint submission relating to the interpretation of para 3(7)(b), and as to whether the transactions in relation to the Existing Properties constituted disposals of a major interest. The focus of such submissions being on the definition of a “major interest in another dwelling” within the meaning of paragraph 3(7)(b).[91]We are grateful for those submissions and make reference to them later in this decision.[92]The Appellants had indicated that they would prefer that the Tribunal only made a decision in principle in relation to the Commencement Issue, leaving the parties to agree ethe substantive requirements between themselves. However, we were concerned that the parties were proceeding on an incorrect understanding of the meaning of the relevant statutory words and we were mindful of the wider public interest in ensuring the correct tax is paid. As such, we considered that it was in the interests of justice to make full findings of fact and set out our view on the relevant law in order to dispose of the appeal.[93]The Tribunal was therefore concerned to ensure that the Appellants had every opportunity to put forward a full evidential picture in order that the Tribunal could make appropriate findings. In particular, we considered that the provision of a TR1 (in relation to New Crane Wharf) and a declaration of trust (in relation to Calderbrook Drive) did not give any context to the disposals said to have taken place.[94]The Tribunal therefore wrote to the parties in the following terms:
“The Tribunal notes that only limited factual evidence was provided to the Tribunal in relation to the requirements under paragraph 3(7) of Schedule 4ZA to Finance Act 2003. The Tribunal considers it necessary to make findings in relation to all these requirements in order to determine the appeal. The Tribunal therefore invites the parties to provide any further factual material and submissions on these requirements. In particular, the Tribunal notes that little or no evidence has been provided as to the Appellants' intentions in relation to the purchased dwellings, nor has evidence been provided as to the circumstances of the disposals of interests in the existing properties. These are matters where it would assist the Tribunal to receive witness evidence from the Appellants. The Tribunal would be minded to agree to the matter being listed for a further day of hearing time so that the parties have the opportunity to put forward any further material they wish. The Tribunal requests that the parties write to the Tribunal setting out their preferred way forward within 14 days of the date of this letter.”
[95]The parties responded by providing a document intended to be a statement of agreed facts. Unfortunately, this document simply restates that the relevant conditions were met without providing any further factual background or submissions on the correct construction of the statute.[96]For example, in relation to the question of whether Mr Sajedi ‘disposed of a major interest’ in Calderbrook drive (within the meaning of the statute), the statement of agreed facts simply states: “On 16 May 2020 Mr Sajedi disposed of a major interest in [Caldebrook Drive]”.[97]This essentially repeats the error, which we drew Mr Hillier’s attention to during the hearing, of assuming that the parties can agree matters of law (i.e. the meaning of ‘disposed of a major interest’) between themselves. Such matters are for the Tribunal to determine after considering any submissions from the parties.[98]Alongside the provision of the statement of agreed facts, the Appellants submitted that:
“In light of the SOAF, the Taxpayers therefore respectfully submit that there is no need for further witness evidence (or for a further day of hearing time), as there is no dispute between the parties as to whether, as a matter of fact, requirements of para.3(7)(a), (b), and (c) are met. Indeed, in light of the SOAF the Taxpayers respectfully submit that there is no basis for this Tribunal to find that those conditions are not fulfilled. However, if there is any further doubt in the Tribunal’s mind on the satisfaction of the requirements in para.3(7) they will of course provide further submissions (either written or orally).”
[99]HMRC also wrote to the Tribunal acknowledging the burden and cost of another hearing to all parties.[100]The parties clearly did not wish to provide any further material to the Tribunal (save for the Appellants’ desire to have a further bite of the cherry in the event that the Tribunal did not agree with their position). We considered whether or not to relist the matter in spite of the parties wishes, but in our view the parties have had ample opportunity to make their case.[101]The Tribunal therefore considered that it would be inappropriate to descend into the arena any further and we proceed to set out our interpretation of the relevant provisions and make findings as to whether the Appellants have discharged their burden of proof in relation to them.

The substantive requirements

[102]The substantive requirements under paragraph 3(7) are:(a) on the effective date of the transaction (“the transaction concerned”) the purchaser intended the purchased dwelling to be the purchaser's only or main residence;(b) in another land transaction whose effective date is during a permitted period, the purchaser or the purchaser's spouse or civil partner disposes of a major interest in another dwelling (“the sold dwelling”); and(c) at any time during the period of three years ending with the effective date of the transaction concerned the sold dwelling was the purchaser's only or main residence.[103]We consider it is only necessary to provide detailed findings in relation to requirement (b).

Requirement (b)

[104]To discharge the burden of proof in relation to this requirement, the Appellants must show that, respectively:(1) AS “disposed of a major interest” in Calderbrook Drive; and(2) PH “disposed of a major interest” in New Crane Wharf.[105]The operative wording is in quotation marks as it is clear that these terms must be construed in the correct context.[106]In particular, as HMRC submitted when discussing the explanatory notes accompanying the introduction of para 3(7)(ba), arrangements in which the purchaser does not dispose of the whole of their former main residence or does so to their spouse could be seen as abusive or contrary to the purpose of the legislation.[107]We first set out our views on the meaning of ‘major interest’, then the meaning of ‘disposed’, before considering the application of the facts to those meanings.

Meaning of ‘major interest’

[108]A “major interest” is defined by FA 2003 s.117 to include freehold and leasehold interests whether existing in equity or law.[109]However, in each case the Appellants’ position is not that a freehold was disposed of, but that instead that a 1% interest in a freehold was disposed of. The question therefore arises as to whether a part share in a freehold is a ‘major interest’ for these purposes.[110]We note that Finance Act 2019 (“FA 2019”) s 44 inserted a new paragraph 2(5) into FA 2003 Sch 4ZA, this new paragraph provides that:
“References in this Schedule refer to a major interest in a dwelling include an undivided share in a major interest in a dwelling”
[111]This would put the matter beyond doubt, but for the operation of the relevant commencement provisions. The commencement provisions in relation to this amendment provide that para 2(5) has effect in relation to any land transaction with an effective date on or after 29 October 2018. The purchases of the New Properties took place prior to that date, so the amendment does not apply.[112]In their joint submissions on the meaning of ‘major interest’, the parties:(1) Submit that the FA 2019 amendment was merely clarificatory,(2) Further submit that if transactions like the transactions in relation to the Exiting Properties did not involve a major interest, there would have been no need for Parliament to introduce the para 3(7)(ba) requirement,(3) Stated that they did not seek a determination of the point.[113]The second point above is a little difficult to follow. Presumably the implication is that:(1) the paragraph 3(7)(ba) requirement is the means chosen by Parliament (in FA 2018) to counteract arrangements where a part share of a major interest is transferred; and(2) That this provision was necessary because disposals of part shares of major interests were seen as abusive at that time.[114]However, this would not explain why Parliament would, having legislated against part share disposals in FA2018, then legislate a year later in FA 2019 to ensure part share disposals were within scope. It seems rather confused to suggest that Parliament was seeking to legislate to ensure that abusive arrangements were within the rules in order to be sure that an anti-avoidance provision could take them out again.[115]Nonetheless, as it is not necessary to determine the question in order to dispose of the appeals, and the parties appear to wish for us not to do so, we do not determine the point.[116]Instead, we proceed on the assumed basis that the 1% shares of the freehold in the Existing Properties could be said to be ‘major interests’ for these purposes.

Meaning of ‘disposed’

[117]In order for the Appellants’ appeals to succeed, they must satisfy the Tribunal that AS and PH respectively ‘disposed’ of a major interest in the relevant Existing Property.[118]The term ‘disposed’ is not defined in the legislation. It is a term used in numerous pieces of legislation and takes its meaning from its context.[119]We must interpret the term purposively and in accordance with the prevailing case law.[120]Before setting out our view of the meaning of disposal in this context, we first summarise some of the key authorities on the approach to take when construing legislation – being often referred to as the Ramsay line of cases after W. T. Ramsay Ltd v Inland Revenue Commissioners [1982] AC 300.[121]A summary of the Ramsay line of cases would normally begin with the Ramsay decision itself. However, it is informative to go back slightly further to the US case cited (in part) by Lord Wilberforce in Ramsay (at p326) - in Gilbert v Comr of Internal Revenue (1957) 248 F 2d 399, 411,

Judge Learned Hand said:

“If…the taxpayer enters into a transaction that does not appreciably affect his beneficial interest except to reduce his tax, the law will disregard it; for we cannot suppose that it was part of the purpose of the Act to provide an escape from liabilities that it sought to impose.”
[122]The lack of an appreciable affect on beneficial interests is clearly a point relevant to the present case.[123]We then go on to note the much-cited encapsulation of the “driving principle” of the Ramsay line of cases given by Ribeiro PJ in Collector of Stamp Revenue v Arrowtown Assets Ltd [2003] HKCFA 46, (2004) 6 ITLR 454, at [35], where he described it as involving:
“35. …a general rule of statutory construction and an unblinkered approach to the analysis of the facts. The ultimate question is whether the relevant statutory provisions, construed purposively, were intended to apply to the transaction, viewed realistically.”
[124]The decision of the House of Lords in the Barclays Mercantile Business Finance Ltd v Mawson (Inspector of Taxes) [2004] UKHL 51, [2005] 1 AC 684 made it clear beyond dispute that the approach for which the Ramsay line of cases is authority is an application of general principles of statutory interpretation. Lord Nicholls of Birkenhead, delivering the joint opinion of the Appellate Committee, identified the “essence” of the approach (at paragraph 32) as being:
“to give the statutory provision a purposive construction in order to determine the nature of the transaction to which it was intended to apply and then to decide whether the actual transaction (which might involve considering the overall effect of a number of elements intended to operate together) answered to the statutory description.”
[125]A recent and significant example of the approach is to be found in Hurstwood Properties (A) Ltd v Rossendale Borough Council [2021] UKSC 16, [2022] AC 690.[126]That case concerned schemes designed to avoid the payment of national non-domestic rates on empty properties. Where an owner vacated a property and had no further use for it, under ordinary rating law they would remain responsible for business rates until they sold. The scheme sought to divert that ongoing liability to a special purpose vehicle company (“SPV”) with no assets.[127]Under the scheme, the owner would grant a short lease of the property to the SPV.[128]The relevant rates are the liability of the “owner”. Pursuant to Local Government Finance Act 1988 s 65, the “owner” of a hereditament is strictly defined as “the person entitled to possession of it”.[129]The intention behind the schemes was that the SPV became the “owner” of the empty property for rating purposes as it was “entitled to possession” of it under the lease. As a result, the intention was that only the insolvent SPV could be pursued for the rates.[130]The Supreme Court summarised the Ramsay approach as follows (at [15]-17]):
“15. In the task of ascertaining whether a particular statutory provision imposes a charge, or grants an exemption from a charge, the Ramsay approach is generally described - as it is in the statements quoted above - as involving two components or stages. The first is to ascertain the class of facts (which may or may not be transactions) intended to be affected by the charge or exemption. This is a process of interpretation of the statutory provision in the light of its purpose. The second is to discover whether the relevant facts fall within that class, in the sense that they “answer to the statutory description” (Barclays Mercantile at para 32). This may be described as a process of application of the statutory provision to the facts. It is useful to distinguish these processes, although there is no rigid demarcation between them and an iterative approach may be required. 16. Both interpretation and application share the need to avoid tunnel vision. The particular charging or exempting provision must be construed in the context of the whole statutory scheme within which it is contained. The identification of its purpose may require an even wider review, extending to the history of the statutory provision or scheme and its political or social objective, to the extent that this can reliably be ascertained from admissible material. 17. Likewise, the facts must be also be looked at in the round.”
[131]In going on to consider the very specific definition of an “owner” for the purposes of the relevant legislation, the Supreme Court held that (at [48]-[49]):
“[48] identifying “the person entitled to possession” in section 65(1) of the 1988 Act as the person with the immediate legal right to possession of the property would defeat the purpose of the legislation. [49] In our view, Parliament cannot sensibly be taken to have intended that “the person entitled to possession” of an unoccupied property on whom the liability for rates is imposed should encompass a company which has no real or practical ability to exercise its legal right to possession and on which that legal right has been conferred for no purpose other than the avoidance of liability for rates. Still less can Parliament rationally be taken to have intended that an entitlement created with the aim of acting unlawfully and abusing procedures provided by company and insolvency law should fall within the statutory description”
[132]The court made it clear that the purpose of the legislation was of singular importance.[133]The court at [59], decided that the words “entitled to possession” in section 65(1) of the 1988 Act:
“are properly construed as being concerned with a real and practical entitlement which carries with it in particular the ability either to occupy the property in question, or to confer a right to its occupation on someone else, and thereby to decide whether or not to bring it back into occupation.”
[134]The court added, at [60], that a purposive construction of this nature “achieves some coherence between the language of the statute and its purpose in identifying the “owner” of an unoccupied non-domestic property as the person who is liable for business rates.”[135]From the above we take the view that we must interpret the meaning of ‘disposed’ purposively. In understanding that purpose, we bear in mind the following points.[136]Firstly, the word ‘dispose’ falls within a schedule providing for higher rates of SDLT where a person acquires a second home.[137]The word ‘dispose’ forms a part of a rule providing an effective relief from those higher rates.[138]The relief is available where the property in question is a replacement for a person’s only or main residence.[139]The explanatory note for the changes introduced in FA 2018 stated:
“The changes will also prevent abuse by requiring the purchaser to dispose of the whole of their former main residence, and to do so to someone who is not their spouse, before benefitting from replacement main residence relief.”
[140]From this we draw the conclusion that it was considered contrary to the purpose of the provisions for a disposal to be either of less than the whole interest in their former residence, or to do so to their spouse.[141]That is not to say we must simply interpret the word ‘disposal’ to exclude all such transactions. That would be to put an unwarranted gloss on the statutory wording. After all it may fairly be said that Parliament felt the need to insert the additional provision included in FA 2018 because the original wording did not always achieve its purpose of excluding abusive arrangements.[142]Nonetheless, we must construe the wording consistently with the above purpose in order to see if the transactions in question answer to the statutory description.[143]We consider that the words “disposes of a major interest” must be taken to be concerned with transactions that had a real-world impact on the rights and obligations of the parties consistent with the notion of a replacement of an only or main residence. This necessarily excludes transactions which do not appreciably affect the beneficial interests of the parties or do not meaningfully change the character of the parties’ relationship to the property.

Conclusion on the Substantive Requirements issue

[144]We are conscious that the parties have not had the opportunity to consider our views on the meaning of the legislation before deciding whether to adduce further evidence or put forward further submissions. We have considered whether we ought to provide a decision in principle on the meaning of the relevant words and leave it to the parties to decide if they need further input to resolve the matter.[145]However, we have decided that it is more in keeping with the overriding objective (to deal with cases fairly and justly) to determine the matter now. We bear in mind particularly the costs of further hearings in this matter (including the responses of the parties to the Tribunal’s previous suggestion that a further day’s hearing may be appropriate) and the need to avoid delay.[146]We consider that the parties (and in particular, the Appellants, who bear the burden of proof on the key issue) have had ample opportunity to present evidence and argument on the factual and legal issues to be determined.[147]Our overall conclusion in relation to the Substantive Requirements issue in each appeal is as follows:(1) New Crane Wharf The only evidence of disposal we have been provided with is a TR1 intended to document a severing of a previous joint tenancy of New Crane Wharf into a tenancy in common, with £19,000 said to have transferred from TP to PH in consideration of PH transferring 1% of his interest to TP. This is equally consistent with a pure paper transaction with no intention to substantively alter the real world position of PH and TP as it is with a real world disposal. We find that PH and TP have not established that, on the balance of probabilities, PH disposed of a major interest in New Crane Wharf .(2) Calderbrook Drive The only evidence we have been provided with is a declaration of trust under which AS was to hold Calderbook Drive on trust for himself and AR as beneficial tenants in common in the following proportions: AS 99% and AR 1%. This is equally consistent with a pure paper transaction with no intention to substantively alter the real world position of AS and AR as it is with a real world disposal. We find that AS and AR have not established that, on the balance of probabilities, AS disposed of a major interest in Calderbrook Drive.[148]In each case, we have not been provided with evidence that establishes a real-world disposal. That is to say, we are not persuaded that the relevant transactions resulted in a change in the character of the ownership by the respective parties. The evidence we have been provided with is consistent with transactions put in place for the purposes of bringing about something that might be described as a technical disposal but without any real-world effect, such that after the transactions the parties continued to enjoy substantially the same benefits of ownership as previously.[149]Accordingly, we find against the Appellants on this issue and the appeals must be dismissed.

Conclusion

[150]For the reasons set out above we:(1) Determine the Commencement Issue in favour of the Appellants. Paragraph Paragraph 3(7)(ba) does not fall to be considered in relation to the New Property purchases.(2) Determine the Substantive Requirements issue against the Appellants. The Appellants have not discharged their burden of demonstrating that they disposed of a major interest in the Existing Properties.[151]Accordingly, we dismiss the appeals.

Right to apply for permission to appeal

[152]This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. Release date: 06th MARCH 2025

Cited in 1 later judgment