Defeating an SDLT Discovery Assessment Through the Hypothetical Officer Test

In Madsen v Revenue and Customs [2026] UKFTT 615 (TC), the First-tier Tribunal (Tax Chamber) ("FTT"), delivered its judgment on 21 April 2026 allowing the Appellant's appeal against a Stamp Duty Land Tax ("SDLT") discovery assessment of £32,480. The case confirms that where a taxpayer has made adequate written disclosure of an avoidance scheme within the statutory enquiry window, a discovery assessment raised under paragraph 28 of Schedule 10 of the Finance Act 2003 (the "Act") may be barred by the restriction in paragraph 30(3) of that Schedule.

In 2011, Rune Madsen (the “Appellant”), purchased a London residential property for £812,000. On the same day as completion, the Appellant granted a ten-year call option over the property to his work colleague, Mr Walker, for a consideration of £100. The arrangement sought to engage the sub-sale provisions in section 45 of the Act, on the basis that Mr Walker had thereby become entitled to call for a conveyance of the property, and claimed full relief from SDLT on the Appellant's purchase. On 31 January 2012, within the nine-month enquiry window, Mr Walker sent a disclosure letter to HMRC, identifying the scheme, citing the Appellant's SDLT reference, and stating it served as notification on behalf of all parties to the scheme. HMRC opened no enquiry, yet issued a discovery assessment on 15 July 2014, later claiming no record of the disclosure letter existed.

The issue before the FTT was whether the discovery assessment was barred by Paragraph 30(3) of Schedule 10 of the Act, namely whether a hypothetical officer of general competence could reasonably have been expected, on the information made available, to be aware of the insufficiency by the closure of the enquiry window.

Applying the principles in Sanderson v HMRC EWCA Civ 19, HMRC v Lansdowne Partners LLP STC 544, and Hicks v HMRC UKUT 12 (TCC), the FTT first found, on the balance of probabilities, that the letter had been sent and received by HMRC but subsequently misfiled. It held the letter was written on the Appellant's behalf, as it expressly notified the scheme on behalf of all parties and cited the Appellant's reference. The hypothetical officer, imbued with reasonable working knowledge of Section 45, would have appreciated that an unexercised call option did not engage the relief, or at minimum presented a reasonable prospect of successful challenge.

Accordingly, the FTT held the Paragraph 30(3) of Schedule 10 of the Act condition was not satisfied, the assessment is not valid and allowed the appeal.

Read the full decision of Madsen v Revenue and Customs [2026] UKFTT 615 (TC) here.