UK and International Tax news

SDLT And Project Blue Update

Monday 25th July 2016

The Court of Appeal has recently issued its decision in the appeal from the Upper Tribunal concerning the liability to SDLT and the application of s.75A FA2003.

In December 2014, the UT issued its decision in the case of Project Blue Ltd (formerly Project Blue (Guernsey) Ltd v  HMRC) [2014 UKUT 0564],  given it is the first case to be heard on the statutory interpretation of s.75A FA2003.

PBL had agreed to buy land – the old Chelsea Barracks – from the MOD for £959m and simultaneously sold it on to MAR, a Qatari bank, which provided Sharia compliant financing, for a price of £1.25bn to cover the acquisition cost plus further building costs. MAR leased the land back to PBL. There were also put and call options to provide for the eventual transfer of the property back to PBL.

PBL’s view was that there was no SDLT payable on its initial purchase or the subsale to MAR given s.45 and s.71A FA2003.which provides for an exemption from SDLT for the style of alternative financing in the later steps of the transaction.

The FTT found in 2013 that there was a charge under s.75A on PBL of 4% of £1.25bn, being £50m. Both sides appealed to the UT on whether s.75A imposes a charge and if it does, who is liable and for how much.

S.75A applies where one person (V) disposes of a chargeable interest in land and another person (P) acquires either it or a chargeable interest deriving from it, a number of transactions are involved in connection with the disposal and acquisition, and the sum of the SDLT payable in respect of the scheme transactions is less that the amount that would be payable on a notional land transaction effecting the acquisition of V’s interest by P.

The UT found that SDLT was due, under s.75A, on £959m and payable by PBL although this was not a unanimous decision. Mr Justice Morgan was the presiding judge and his vote prevailed. Whilst Judge Howard Nolan agreed that it was PBL that was liable to the SDLT, he considered that the tax should have been 4% on £1.25bn.

The CA has now held that MAR was liable to pay SDLT on completion of its own contract and s.75A did not apply.

If you would like to discuss the above in more detail, please contact Keith Rushen on 0207 486 2378.

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