Paul Crichton
In a recent Upper Tribunal case (Investment and Securities Trust Limited v HMRC), a company won part of its appeal over property tax reliefs.
The Upper Tribunal found that the company was entitled to relief from the Annual Tax on Enveloped Dwellings (ATED), because it held an option over a property solely to develop and resell it as part of its property development trade.
Background
The First Tier Tribunal had previously ruled that the company couldn’t claim either ATED relief or higher rate Stamp Duty Land Tax (SDLT)/Land and Buildings Transaction Tax (LBTT) in Scotland (which is very similar to SDLT) relief on the property option.
The company had originally acquired the option for three reasons:
- Addressing the director/shareholder’s pressing need for funds.
- To prevent the sale of the property to a third party.
- To allow time to raise development funds.
What the Upper Tribunal decided
The Upper Tribunal agreed with the First Tier Tribunal that higher rate SDLT relief was not available. To qualify, the legislation requires the property to be acquired exclusively for development and resale. That test wasn’t met.
However, the Upper Tribunal disagreed with how the First Tier Tribunal had applied the rules for ATED relief. Once the company had acquired the option, the first two reasons had been met. From that point on, its only remaining purpose for holding the option was to develop and sell the property. That meant the test for ATED relief was met.
This case highlights how important it is to be clear about your intentions and purpose when acquiring or holding property interests – even subtle differences can affect the availability of tax reliefs.
If your business is involved in property development or investment, and you’d like to review your position on SDLT, LBTT or ATED, please get in touch with our team for tailored advice.