08 February 2024

Brown & Anr v HMRC CA-2023-000118

This appeal concerned an arrangement intended to avoid SDLT under which (i) the purchasers formed a company and subscribed for shares in that company, (ii) the seller sold a property to the company, and (iii) the company reduced its capital and made a distribution in specie of the property to the purchasers. The arrangement sought to take advantage of sub-sale relief under s45 FA 2003 with the taxpayers arguing that the first sale should be disregarded and that no consideration arose in relation to the distribution.

The primary issue was whether or not the consideration paid under the original contract had been given “directly or indirectly” by the purchasers. The Court of Appeal has held that this is a fact-sensitive question but that, in relation to the payments made under these arrangements, the consideration had been given “indirectly”. The Court also held in the alternative that the scope of the determination issued by HMRC was broad enough to charge the notional transaction under s75A.

Ben Elliott (instructed by HMRC Solicitors) for the Respondent

A copy of the judgment can be found here