HMRC Losses

Over the last five years HMRC have won practically every SDLT appeal on “mixed-use”, multiple dwellings relief and “derelict” dwellings. That trend has come to an end. HMRC have lost four SDLT appeals in quick succession, and it is possible that they will lose more appeals in cases in respect of which we are awaiting decisions. In my view, this is a combination of HMRC finding the limits of statutory interpretation and reapplying legal arguments to facts that are dissimilar to those in the appeals in which those arguments found favour at the First-tier Tribunal. Appeals based on multi-factorial assessments do not lend themselves to commoditised challenges. HMRC’s absolute focus on privacy in multiple dwelling relief challenges is an example of this.

The relevant appeals where HMRC have lost recently are:

• Suterwalla, a “mixed-use” appeal, where the Upper Tribunal refused to intervene in the First-tier Tribunal’s findings of fact but held that the First-tier Tribunal was wrong to take into account a lease granted after completion.

• Guerlain-Desai, a “mixed-use” appeal, where the First-tier Tribunal found that woodland bought with a dwelling did not support the dwelling as it had become a favoured spot for the local community.

• Hurst, a “mixed-use” appeal, where the First-tier Tribunal accepted that the relevant dwelling answered to the description of a “hotel, inn or similar establishment”.

• Davis (unpublished), a derelict dwelling appeal, where the purchased property had various structural defects and asbestos-containing materials making it too dangerous to live there.

I am awaiting decisions from the First-tier Tribunal in three SDLT appeals that I have either conducted or instructed Counsel on: namely,

• A “mixed-use” appeal where 40 acres of land adjoining a dwelling was exclusively and continuously used by a farmer to grow a crop of grass once or twice a year for hay over many years prior to the sale.

• A reclaim of “higher rates SDLT”, which HMRC accept was paid in error (despite being in accordance with HMRC’s guidance at the time) but was denied on procedural grounds.

• A reclaim of SDLT, which HMRC accept was not due, but was also denied on procedural grounds.

I expect more SDLT appeals will be published on “mixed-use”, multiple dwellings relief and “derelict dwellings” over the rest of this year. There is unlikely to be a let-up in SDLT disputes for the next 12 months recognising the delay for appeals to reach the First-tier Tribunal; though the pace of appeals may start to slow as the boundaries become clearer.

I am acting in two appeals, which will be heard next year – one on “mixed-use” and another on multiple dwellings relief. The facts in both are strong.  

Appeals to watch
Look out for the Upper Tribunal decision in Mudan on derelict dwellings, and the Upper Tribunal decision in The Tower One St George Wharf Ltd on SDLT group relief. We may also see one or more SDLT appeals on the application of the general anti-avoidance rule (section 75A) to benign facts.