The case of Mr. Benjamin Cohen (“Mr. Cohen”) against HM Revenue and Customs (HMRC) revolves around the application of the higher rate of Stamp Duty Land Tax (SDLT) on his property purchase at 20 Luna Court, Newmans Lane, Loughton, IG10 1ES (“Luna Court”).
The appeal centers on the interpretation of certain conditions under Schedule 4ZA to the Finance Act 2003 and whether Luna Court qualifies as Mr. Cohen’s replacement for his primary residence.
Mr. Cohen’s SDLT case began when HMRC imposed a higher rate of SDLT, amounting to £15,045, on his purchase of Luna Court, considering it a single dwelling transaction.
Single dwelling transactions are subject to the higher rate of SDLT if Conditions A to D, as outlined in paragraph 3 of Schedule 4ZA to the Finance Act 2003, are met.
These conditions pertain to:
- the nature of the purchaser,
- the value of the transaction,
- the existence of a major interest in another dwelling, and
- whether the purchased dwelling is a replacement for the buyer’s only or main residence.
Two primary issues were raised in the case:
- Whether HMRC initiated the inquiry within the prescribed timeframe.
- Whether Luna Court qualifies as a replacement for Mr. Cohen’s only or Main Residence, focusing on Condition D.
Findings of Fact
To establish a factual basis for the case, the following key points were considered:
- Mr. Cohen, a full-time osteopath, had also invested in various properties, often with the assistance of his father, Mr. David Cohen.
- Mr. Cohen purchased the property at 337 Sherrard Road, London, E12 6UH (“Sherrard Road”) on 23 July 2018, which needed renovation.
- He moved into Sherrard Road on 29 August 2018 for a brief ten-day period, during which he slept there, moved his belongings in, and entertained friends.
- Before moving into Sherrard Road, Mr. Cohen had already decided to sell it and purchase Luna Court, evident from letters dated August 2018 and February 2019.
- Mr. Cohen sold Sherrard Road to his parents on 25 October 2018.
Council tax statements showed a 100% empty property discount for a short period at Sherrard Road. Mr. Cohen completed the purchase of Luna Court on 30 October 2018.
Whether the Enquiry was Opened in Time the case’s first issue revolved around the timeliness of HMRC’s inquiry initiation. It was established that the effective date of the transaction was 30 October 2018, and HMRC’s inquiry must be initiated within nine months of the filing date.
HMRC issued a notice of inquiry on 14 August 2019, which was deemed within the required timeframe. The relevant law specified that notices could be delivered or served at the taxpayer’s last known place of abode.
Mr. Cohen’s last known address was Alderton Hill, and the notice was sent there, with no dispute that it was delivered. Thus, the inquiry was opened in compliance with legal requirements.
Additionally, even if the notice was not properly served, Mr. Cohen had acknowledged receiving it in his letter dated 19 August 2019, ensuring timely notice.
The primary dispute centered around whether Sherrard Road qualified as Mr. Cohen’s only or main residence. Condition D of Schedule 4ZA was the focal point, as it required Luna Court to be a replacement for his only or main residence.
The tribunal found that Sherrard Road did not constitute Mr. Cohen’s only or main residence. Key factors considered included:
- Mr. Cohen’s short-lived occupancy of Sherrard Road.
- His intention to live there temporarily, as evidenced by his prior decisions to sell Sherrard Road and purchase Luna Court.
- The fact that Mr. Cohen did not continue to reside in Sherrard Road for the entire period between the completion of renovation works and the Luna Court purchase.
In summary, Mr. Benjamin Cohen’s appeal against HMRC’s imposition of the higher rate of Stamp Duty Land Tax on his purchase of Luna Court was dismissed.
The tribunal concluded that HMRC had initiated the inquiry within the required timeframe and that Sherrard Road did not qualify as Mr. Cohen’s only or main residence, thus not meeting Condition D under Schedule 4ZA of the Finance Act 2003. Consequently, the higher rate of SDLT applied to the Luna Court transaction was upheld.
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