The taxpayer appealed the FTT’s findings regarding the validity of the enquiries and HMRC cross-appealed the FTT’s decision that it was time-barred from raising the discovery assessment. The decision regarding the validity of the enquiries was decisive in determining the taxpayer’s appeal.
On HMRC’s cross-appeal, the UT disagreed with the FTT and held that HMRC were within time to raise the discovery assessment. The UT considered that the FTT erred in finding that the filing requirements under section 76 Finance Act 2003 for a Section 75A notional transaction could be satisfied if the taxpayer submitted a ‘real-world’ SDLT return which covered the same purchaser over the same chargeable interest. Instead, the UT held that section 75A triggers a separate notifiable transaction from the actual land transactions that took place and in turn, a separate requirement to submit a return for the notional transaction.
In coming to its decision, the UT noted that: (1) the relief claimed on the ‘real-world’ SDLT return was not available to the Section 75A notional transaction; (2) the real-world SDLT return self-assessed a nil liability (which would not have been the case for the Section 75A notional transaction); and (3) the taxpayer had sent a letter to HMRC asserting that Section 75A did not apply.
The UT was also dismissive of the suggestion that the filing of a protective nil return for Section 75A could protect taxpayers from HMRC raising discovery assessments under the 20-year time limit. The UT suggested that taxpayers could pay SDLT on the basis that Section 75A applies and then apply to amend the return (or make an overpayment relief claim) to recover the SDLT paid, but did not consider this option further as it was unnecessary to determine the case. The UT acknowledged it might be impossible for taxpayers to escape the 20-year time limit where Section 75A applies, and this may have been the intended outcome.
Although the UT’s judgment on this point is obiter, it raises broader ramifications. This is particularly the case for genuine commercial transactions where taxpayers are seeking certainty and finality over their SDLT affairs. It appears that the usual time limits that are supposed to provide taxpayer certainty do not apply in relation to Section 75A risks.
