The recent First-tier Tribunal case, Sajedi & Ors v HMRC [2025] UKFTT 297(TC), concerned relief from the higher rates of Stamp Duty Land Tax (SDLT) where a main residence is replaced, and specifically the meaning of the requirement to ‘dispose’ of an interest in the old dwelling, interpreted in the light of the Ramsay line of case law. When a new main residence (the ‘New Dwelling’) is purchased and the previous main residence (the ‘Old Dwelling’) has not been sold, ‘higher rates’ of SDLT are payable, which include a surcharge of 3 percent (now 5 percent). However, buyers subsequently disposing of the Old Dwelling in the three years after the purchase of the New Dwelling can claim back the surcharge. Since 22 November 2017, new legislation stipulated the disposal could not be such that the purchaser or their spouse/civil partner retained an interest in the Old Dwelling.
Background
The decision concerned two joint appeals. In each case:
- Prior to 22 November 2017, a couple jointly bought a New Dwelling and paid SDLT based on the higher rates of SDLT as they still had their Old Dwelling at the point of acquisition; and
- Towards the end of the three-year period and after 22 November 2017, one partner effectively transferred a 1 percent interest in the Old Dwelling to the other, with a view that this represented the disposal of a major interest in the Old Dwelling required for the reclaim of the surcharge to be available.
Decision on application of the transitional rules
HMRC and the taxpayers wanted to confine the decision to whether or not the new 22 November 2017 restriction precluded a reclaim. HMRC argued that the new restriction applied because it applied to any land transaction on or after that date and the disposal of the interest in the Old Dwelling was after this time. However, the Tribunal agreed with the taxpayer that, because the taxable transaction is the acquisition of the New Dwelling, it is that transaction which is the ‘land transaction’ in question. As that transaction was prior to 22 November 2017, the old rules apply and hence the reclaim is not precluded by reason of the transitional rules.
Decision on meaning of ‘disposal’
However, despite neither party wishing to argue the case further, the Tribunal ruled that it was required to determine whether the refund of SDLT was due and could not be constrained by the parties to consider only one aspect of that. Accordingly, it insisted on considering the meaning of ‘disposes’ to determine if a major interest in the Old Dwelling had been disposed of.
The Tribunal considered that, as ‘disposes’ was not defined in the relevant legislation, the Tribunal should take the well-trodden approach in Arrowtown, that the “ultimate question is whether the relevant provisions, construed purposively, were intended to apply to the transaction, viewed realistically.”
The Tribunal concluded that it would be contrary to the purpose of the provisions for a disposal to result in relief from the surcharge where the disposal did not have a real-world impact on the property ownership position. Paragraph 148 of the decision states that:
“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.”
Why it matters
The case is interesting as it applies the Ramsay line of case law to the meaning of a disposal and provides a stark warning that the Tribunal will make every effort to quash any perceived avoidance of SDLT, even if it means arguing points of law on which neither party has made submissions.
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