Elizabeth Court (Bournemouth) Ltd v HM Revenue and Customs

Relief under section 74 of the Finance Act 2003 depends on each statutory condition being satisfied. Section 4A of the Leasehold Reform, Housing and Urban Development Act 1993, as incorporated by section 74(4)(a), may define an RTE company even though related amendments have not commenced. That does not create the statutory right of collective enfranchisement required by section 74(4)(b). Until those amendments take effect, a company acting as nominee purchaser for qualifying tenants cannot satisfy that condition merely because it meets the proposed RTE company definition.

The appellant acquired the freehold and leasehold reversions of a block of flats as nominee purchaser for qualifying tenants and paid stamp duty land tax. It sought repayment under section 74 of the Finance Act 2003, which provides a special calculation where a chargeable transaction is entered into by an RTE company in pursuance of a right of collective enfranchisement.

The Special Commissioner dismissed the appeal. The central issue was whether an RTE company could obtain section 74 relief before the statutory amendments intended to give RTE companies the right of collective enfranchisement had taken effect.

1. Appeal dismissed. The appellant was an RTE company for the purposes of section 74 of the Finance Act 2003. Section 4A was incorporated into section 74(4)(a) and had legal effect for stamp duty land tax, notwithstanding that it was not yet operative in the statutory scheme contemplated by the Commonhold and Leasehold Reform Act 2002.
2. Sections 4B and 4C were not incorporated into section 74. The appellant’s failure to comply with section 4B, and the absence of regulations under section 4C, therefore did not prevent it from being an RTE company for section 74.
3. Section 74 nevertheless required the transaction to be entered into in pursuance of the right of collective enfranchisement defined by section 74(4)(b). Before the relevant amendments were commenced, that right remained vested in qualifying tenants and was exercised through a nominee purchaser. An RTE company acting in that capacity did not itself possess the defined statutory right.
4. The conditional wording of section 74 indicated that relief was intended to become available when the relevant amendments were brought into force. The court declined to adopt a strained construction based on the introduction of a new tax and associated reliefs. Pepper v Hart [1993] AC 593 provided no ministerial statement resolving the issue.
5. An argument that the appellant was a bare trustee under Schedule 16 to the Finance Act 2003 was raised for the first time on appeal. It was refused because it might depend on uninvestigated facts and could not properly be determined on the appeal.

Special Commissioner: Dr Nuala Brice dismissed the appellant’s appeal against closure notices refusing repayment of stamp duty land tax.

High Court (Chancery Division): The Chancellor dismissed the appeal.