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Applicability of SDLT Refund in Smith Homes 9 Ltd v HMRC

Published by UK Property Accountants
Published Date: August 16, 2023
Categories: Case Law, HMRC, MDR

This article discusses a recent decision regarding a Stamp Duty Land Tax (SDLT) case in England. The decision involves the applicability of Multiple Dwellings Relief (MDR) and the claim for overpaid tax. The article provides an overview of the facts, the legal framework, HMRC's grounds for the strikeout application, the appellant's contentions, and the tribunal's analysis and decision.

Image of man calculating stamp duty land tax


Background

The appellant purchased an office building, Shield House, and initially classified it as "non-residential" in the SDLT return. However, after realizing that MDR was available, the appellant made a claim for relief for overpaid tax, stating that they were not aware of the availability of MDR at the time of the transaction.

Legal Framework

The relevant provisions in this case are outlined in paragraphs 34 and 34A of Schedule 10 and paragraphs 6 and 7 of Schedule 11A to the Finance Act 2003. Paragraph 34 allows a person to make a claim for repayment or discharge of tax if they believe the tax was not due or there was a mistake in a claim or election. 

Image of Legal Framework

Paragraph 34A sets out cases where HMRC is not liable to give effect to a claim, including excessive payments due to a mistake in a claim or election. Paragraph 6 of Schedule 11A requires HMRC to give effect to a claim as soon as practicable, subject to an enquiry being made into the claim.

HMRC's Grounds for Strikeout Application

HMRC contended that the appellant's claim fell within Case A of paragraph 34A, as the claim was excessive due to a mistake in failing to make a claim for MDR within the prescribed time limit.

They argued that the appellant could not circumvent the time limit by submitting a repayment claim under paragraph 34.

Appellant's Contentions

The appellant argued that they were unaware of the possibility of a claim for Multiple Dwelling Relief and that there was a lack of public guidance on the matter.

They claimed that HMRC should give effect to the claim as they could not reasonably have known about the relief within the time limit.

Tribunal's Analysis and Decision

Tribunal's Analysis and Decision

The tribunal analysed the appellant's knowledge and the availability of guidance on MDR. They concluded that the appellant, being in the construction industry, ought reasonably to have known about the relief, despite the absence of specific guidance.

The tribunal determined that Case C of paragraph 34A applied, as the appellant could reasonably have known about the relief within the 12-month period. Therefore, HMRC was not liable to give effect to the claim for repayment of overpaid tax under paragraph 34.

Procedural Issues

The tribunal also addressed procedural issues regarding the validity of the enquiry and closure notices issued by HMRC. They found that the enquiry notice was sent out of time, rendering it invalid, along with the subsequent closure notice and review conclusion.

Conclusion

The tribunal concluded that there did not appear to be a valid appeal in existence due to HMRC's failure to make an appealable decision. However, they recognized the appellant's argument that HMRC had a statutory obligation to give effect to a repayment claim when an enquiry was not opened within the time limit.As a result, the tribunal refused the strikeout application and acknowledged the possibility of a valid appeal.

This case highlights the importance of timely claims for relief and the role of HMRC in responding to such claims within the prescribed timeframes. It also emphasizes the need for taxpayers to stay informed about available reliefs and seek professional advice when necessary.

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