A modification of the wholly and exclusively test.
The recent decision of the Upper Tribunal in Investment and Securities Trust Ltd v HMRC [2025] UKUT 331 (TCC) (reported in Tax Journal, 24 October 2025) may have a wider significance than the SDLT and ATED issues which were the particular subject matter of the case. It is all about the meaning of ‘exclusively’ – a term with which we are all extremely familiar. But there is more.
Brief context. There is an exemption from ATED and a relief for SDLT where the interest in land is acquired for development in the course of a property development trade.
More precisely, for ATED, FA 2013 s 138 provides an exemption for a person who was carrying on the trade where the land was ‘held exclusively for the purpose of developing and reselling the land in the course of the trade’.
For SDLT purposes the relief is not quite the same. FA 2003 Sch 4A para 5 provides that the land must have been ‘acquired exclusively for one or more of the following purposes ... development or redevelopment and resale in the course of a property development trade...’
This looks the same but a crucial difference arises from the highlighted terms. For ATED the land must have been held exclusively for that purpose, but for SDLT it must have been acquired exclusively for that purpose.
In this case, the interest in land was held for development for the purposes of both taxes – so that satisfied the ATED test. However, the tribunal had much more to say about the SDLT test and in particular whether it was acquired exclusively for that purpose.
We are told that the seller of the interest in land had a pressing need for funds and wanted to sell. Her son (who was a director and shareholder of the company) decided that the company should buy the property because it was a good development opportunity. The tribunal took the view that the company acquired the property partly to address the seller’s need for funds. That meant it was not acquired exclusively for the purpose of the development trade, and the relief could not therefore apply.
It seems a bit tough to extend the purpose test of the purchaser to include the purposes of the seller. This has a resonance with the concept of duality of purpose and the requirement for expenditure to be wholly and exclusively for the purposes of the trade. In fact, it is more than just a resonance: it is the same test, i.e. whether the acquisition or purchase of the asset was made exclusively for the purposes of the trade.
If I want to buy a computer wholly and exclusively for the purposes of my work, should it really matter who I buy it from? The seller will of course have a need (pressing or otherwise) to sell it, but if I buy it from my local shop rather than on Amazon because I want to support my local shop, this would make the expenditure disallowable. I would be acquiring the asset partly to address the seller’s needs or purposes.
I cannot purchase an asset without the seller selling it – so however sympathetic I am to the needs or motivation of the seller, that could perhaps be disregarded as incidental, following Mallalieu v Drummond. The tribunal accepted that putting funds in the hands of a vendor is an inevitable and incidental consequence of an acquisition, but the connection between the parties in this case made all the difference.
Anyway, never mind about all that. Decisions of the Upper Tribunal are binding precedents, so this is a modification of the purpose test we need to take on board.
In the words of the immortal Nat King Cole, there may be trouble ahead...
A modification of the wholly and exclusively test.
The recent decision of the Upper Tribunal in Investment and Securities Trust Ltd v HMRC [2025] UKUT 331 (TCC) (reported in Tax Journal, 24 October 2025) may have a wider significance than the SDLT and ATED issues which were the particular subject matter of the case. It is all about the meaning of ‘exclusively’ – a term with which we are all extremely familiar. But there is more.
Brief context. There is an exemption from ATED and a relief for SDLT where the interest in land is acquired for development in the course of a property development trade.
More precisely, for ATED, FA 2013 s 138 provides an exemption for a person who was carrying on the trade where the land was ‘held exclusively for the purpose of developing and reselling the land in the course of the trade’.
For SDLT purposes the relief is not quite the same. FA 2003 Sch 4A para 5 provides that the land must have been ‘acquired exclusively for one or more of the following purposes ... development or redevelopment and resale in the course of a property development trade...’
This looks the same but a crucial difference arises from the highlighted terms. For ATED the land must have been held exclusively for that purpose, but for SDLT it must have been acquired exclusively for that purpose.
In this case, the interest in land was held for development for the purposes of both taxes – so that satisfied the ATED test. However, the tribunal had much more to say about the SDLT test and in particular whether it was acquired exclusively for that purpose.
We are told that the seller of the interest in land had a pressing need for funds and wanted to sell. Her son (who was a director and shareholder of the company) decided that the company should buy the property because it was a good development opportunity. The tribunal took the view that the company acquired the property partly to address the seller’s need for funds. That meant it was not acquired exclusively for the purpose of the development trade, and the relief could not therefore apply.
It seems a bit tough to extend the purpose test of the purchaser to include the purposes of the seller. This has a resonance with the concept of duality of purpose and the requirement for expenditure to be wholly and exclusively for the purposes of the trade. In fact, it is more than just a resonance: it is the same test, i.e. whether the acquisition or purchase of the asset was made exclusively for the purposes of the trade.
If I want to buy a computer wholly and exclusively for the purposes of my work, should it really matter who I buy it from? The seller will of course have a need (pressing or otherwise) to sell it, but if I buy it from my local shop rather than on Amazon because I want to support my local shop, this would make the expenditure disallowable. I would be acquiring the asset partly to address the seller’s needs or purposes.
I cannot purchase an asset without the seller selling it – so however sympathetic I am to the needs or motivation of the seller, that could perhaps be disregarded as incidental, following Mallalieu v Drummond. The tribunal accepted that putting funds in the hands of a vendor is an inevitable and incidental consequence of an acquisition, but the connection between the parties in this case made all the difference.
Anyway, never mind about all that. Decisions of the Upper Tribunal are binding precedents, so this is a modification of the purpose test we need to take on board.
In the words of the immortal Nat King Cole, there may be trouble ahead...
