HMRC disappoints house builders and partnerships looking for SDLT relief
On 25 November, the Chartered Institute of Taxation (CIOT) received confirmation from HMRC that partial relief from stamp duty land tax (SDLT) would not be available where the members of an LLP, or the partners in a partnership, consists of both qualifying and non-qualifying house-building companies.
Section 58A and Schedule 6A of the Finance Act 2003 provide for a particular relief from SDLT in the case of acquisitions of residential property which includes (at paragraph 1 of Schedule 6A) where a qualifying house-building company acquires a dwelling from an individual. Relief under this paragraph is available where the individual in question acquires a new main residence from the house-building company in consideration for the house-building company acquiring the individual’s previous main residence. To qualify, the house-building company must be a company that carries on the business of constructing or adapting buildings or parts of buildings for use as dwellings.
HMRC had previously confirmed that the above relief could be available where a partnership or LLP was the party acquiring the property in question, as those entities are treated as transparent for SDLT purposes, and the partners / members are treated as joint purchasers (even where the entity has legal personality, as in the case of an LLP). Where the members of the LLP, or partners of the partnership, were all house-building companies, HMRC confirmed that paragraph 1 of Schedule 6A could apply.
The CIOT then further wrote to HMRC in August 2020 to enquire whether partial relief would be available where the members of the LLP, or partners or the partnership, consisted of a mix of both qualifying and non-qualifying house-building companies. The argument in favour of this relies on the decision in Pollen Estate Trustee Co Ltd v HMRC  EWCA Civ 75A, in which the Court of Appeal held that the SDLT relief for charities is partially available on a joint purchase if some but not all of the joint purchasers qualified for the relief (by reading in “to the extent” wording).
The CIOT suggested that the decision in Pollen Estate supported the argument that partial relief should be available for property partly acquired by partnerships consisting partly of qualifying house-building companies for the following reasons:
- there is no conceptual uncertainty or practical administrative problem in applying the relief on a partial basis; and
- there is no policy reason why partial relief should not be available.
The policy intent behind the relief is to facilitate liquidity in the housing market and where house builders are established as LLPs (as they often are – particularly when in joint venture with non-taxpayers), allowing partial relief would further this policy intent.
HMRC did not agree with the CIOT’s suggested position, however. Their response states that they do not believe that a partial relief is available in relation to paragraph 1 of Schedule 6A. HMRC’s approach confines the Court of Appeal’s decision in Pollen Estate to transactions which involve a charity as a joint purchaser, rather than conveying a wider policy decision as to the partial applicability of SDLT reliefs more generally.
This will be disappointing news to house-building companies, particularly to those who operate through partnerships, as this confirms that no relief from SDLT will available where the partnerships have a mix of qualifying house-building companies and non-qualifying housebuilding companies.
It is also disappointing for other taxpayers that are eligible for SDLT relief but operate through a partnership with a partner that does not qualify for the same relief. It is questionable whether HMRC’s approach is correct but unsurprising that they have sought to restrict the application of Pollen Estates.