A recent SDLT case considers the position of a tax loophole where the taxpayers lost.
The case of A Sajedi and others v HMRC [2025] UKFTT 297 (TC) (reported in Tax Journal, 21 March 2025) considered the position of a tax loophole where the taxpayers lost. This involved the ability to reclaim the 3% SDLT surcharge and the key facts were as follows:
In 2017 two couples acquired new homes without selling their old homes and therefore incurred the 3% SDLT surcharge.
Had they have sold their old homes within three years of buying the new ones then they could have reclaimed the surcharge.
Instead, they entered into a ‘scheme’ whereby in 2020 the two couples each sold a 1% stake in their old homes to each other.
They argued that such a 1% disposal was sufficient to trigger a repayment of the surcharge.
Prima facie they were correct because all that was required to trigger the refund was the disposal of ‘a major interest’ and 1% was a major interest.
Don’t get too excited because this loophole was removed by FA 2018 which now effectively requires all of the old property to be disposed of in order to trigger a refund.
To begin with, it was this ‘new’ legislation which was the subject of the appeal.
Although the new legislation applied from 22 November 2017, the old legislation applied for purchases before this date and the new homes had been acquired before this date.
The First-tier Tribunal (FTT) went ‘rogue’ and insisted on looking at the whole case even though the taxpayer won its argument against HMRC.
Ultimately, the taxpayers lost at the FTT broadly because a 1% disposal was not seen as material.
Ramsay was cited as a reason behind the ‘materiality argument’.
Why did the taxpayers lose? This is quite a difficult case to understand, but the gist of the tribunal’s decision was that 1% was too small to count as a meaningful disposal or something that could have a material effect in the real world. It bolstered this argument with a purposive approach to the legislation, saying that the 2016 rules were clearly only aimed at giving relief where the whole of a previous house has been disposed.
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.’
This seems somewhat problematic in law because there was clearly a disposal of 1% of the old property and it was accepted that 1% was ‘a major interest’. It seems strange that FTT can then argue that a disposal cannot meaningfully take place of something so small – and this is the main part of their argument.
Our view: This is further evidence of how the FTT is taking a firm hand with perceived SDLT avoidance. Although the ‘planning’ here did seem quite contrived and uncommercial, it did seem at first to work based on the letter of the law. The FTT first had to extend the scope of the case to look into the question of whether a disposal had arisen and then really had to push hard to conclude that there had been no disposal given that as a matter of fact a 1% interest had been disposed of in each case. Although the result seems fair, I would feel more comfortable if they had got to it by means of anti-avoidance legislation rather than redefining definitions (what is a disposal?) in a far-fetched way. It will be interesting to see if this particular case is appealed. In an ideal world, the rationale behind FTT decisions should be logical and not simply driven by the need to get to a perceived fair result at any cost.
A recent SDLT case considers the position of a tax loophole where the taxpayers lost.
The case of A Sajedi and others v HMRC [2025] UKFTT 297 (TC) (reported in Tax Journal, 21 March 2025) considered the position of a tax loophole where the taxpayers lost. This involved the ability to reclaim the 3% SDLT surcharge and the key facts were as follows:
In 2017 two couples acquired new homes without selling their old homes and therefore incurred the 3% SDLT surcharge.
Had they have sold their old homes within three years of buying the new ones then they could have reclaimed the surcharge.
Instead, they entered into a ‘scheme’ whereby in 2020 the two couples each sold a 1% stake in their old homes to each other.
They argued that such a 1% disposal was sufficient to trigger a repayment of the surcharge.
Prima facie they were correct because all that was required to trigger the refund was the disposal of ‘a major interest’ and 1% was a major interest.
Don’t get too excited because this loophole was removed by FA 2018 which now effectively requires all of the old property to be disposed of in order to trigger a refund.
To begin with, it was this ‘new’ legislation which was the subject of the appeal.
Although the new legislation applied from 22 November 2017, the old legislation applied for purchases before this date and the new homes had been acquired before this date.
The First-tier Tribunal (FTT) went ‘rogue’ and insisted on looking at the whole case even though the taxpayer won its argument against HMRC.
Ultimately, the taxpayers lost at the FTT broadly because a 1% disposal was not seen as material.
Ramsay was cited as a reason behind the ‘materiality argument’.
Why did the taxpayers lose? This is quite a difficult case to understand, but the gist of the tribunal’s decision was that 1% was too small to count as a meaningful disposal or something that could have a material effect in the real world. It bolstered this argument with a purposive approach to the legislation, saying that the 2016 rules were clearly only aimed at giving relief where the whole of a previous house has been disposed.
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.’
This seems somewhat problematic in law because there was clearly a disposal of 1% of the old property and it was accepted that 1% was ‘a major interest’. It seems strange that FTT can then argue that a disposal cannot meaningfully take place of something so small – and this is the main part of their argument.
Our view: This is further evidence of how the FTT is taking a firm hand with perceived SDLT avoidance. Although the ‘planning’ here did seem quite contrived and uncommercial, it did seem at first to work based on the letter of the law. The FTT first had to extend the scope of the case to look into the question of whether a disposal had arisen and then really had to push hard to conclude that there had been no disposal given that as a matter of fact a 1% interest had been disposed of in each case. Although the result seems fair, I would feel more comfortable if they had got to it by means of anti-avoidance legislation rather than redefining definitions (what is a disposal?) in a far-fetched way. It will be interesting to see if this particular case is appealed. In an ideal world, the rationale behind FTT decisions should be logical and not simply driven by the need to get to a perceived fair result at any cost.
