The Pollen Estate Trustee Company Ltd & Anor v Revenue And Customs

Where land is acquired by a bare trustee for several beneficial owners, stamp duty land tax is charged on the single equitable estate collectively acquired, not on each beneficiary’s undivided share separately.

However, Finance Act 2003, Schedule 8 paragraph 1 must be construed purposively. A joint land transaction is exempt from charge to the extent of a charity’s beneficial interest, where that interest is held for qualifying charitable purposes. The court may adopt that reading where it corrects an evident drafting omission, gives effect to the statutory purpose and identifies the substance of the correction without engaging in legislation.

The first appellant, trustee of the Pollen Estate, acquired commercial property for a bare trust whose beneficiaries included charities and non-charities. The second appellant, King’s College London, was a charity which acquired a 46.3 per cent beneficial interest in a flat under its employee shared-equity scheme; the employee held the remaining interest.

The Upper Tribunal held that SDLT was charged on the entire interest acquired jointly and that charities relief was unavailable because the purchasers were not all charities. The appellants challenged both conclusions. The central issue was whether the charitable beneficiaries could obtain SDLT relief for their proportionate beneficial interests in jointly acquired land.

1. Appeals allowed on the charities-relief issue. The court upheld the Upper Tribunal’s identification of the chargeable interest, but held that it had construed the relieving provision too literally.

2. Under Finance Act 2003, a land transaction is the acquisition of a chargeable interest. Where a trustee acquires land as bare trustee, Schedule 16 paragraph 3 deems the interest acquired by the trustee to be vested in the beneficiaries. The relevant interest is therefore the equitable fee simple or term of years acquired collectively by the trustee, not each beneficiary’s undivided share. The beneficiaries are jointly entitled to that single equitable estate. There is one land transaction and SDLT is calculated by reference to the aggregate consideration.

3. The court nevertheless gave Schedule 8 paragraph 1 a purposive construction. It should be read as providing that a land transaction is exempt from charge to the extent that the purchaser is a charity and the statutory conditions are met. Relief is therefore available for the proportion of the beneficial interest attributable to a charity which holds that interest for qualifying charitable purposes.

4. That construction corrected an evident drafting omission without impermissible judicial legislation. The statutory scheme afforded relief where a charity acquired property alone, through a bare trustee, with other charities, or by a separate purchase of an existing beneficial share. No policy justified denying relief solely because the charity participated in a joint acquisition with non-charities. The anti-avoidance condition in Schedule 8 paragraph 1(3) also addressed the suggested avoidance concern.

5. The court applied the statutory-correction approach in Inco Europe Ltd v First Choice Distribution [2000] 1 WLR 586. It was clear that Parliament intended relief for qualifying charitable interests, had inadvertently failed to provide for this joint-purchase situation, and would have enacted relief proportionate to the charity’s undivided beneficial share. The fact that the precise legislative wording was not available did not prevent that construction.

• Court of Appeal (Civil Division): Allowed both appeals on the construction of charities relief, while affirming the Upper Tribunal’s conclusion that SDLT was charged on the equitable estate collectively acquired: [2013] EWCA Civ 753.

• Upper Tribunal (Tax and Chancery Chamber): Held that the relevant chargeable interest was the entire interest acquired jointly and that no charities relief was available where a non-charity also held a beneficial interest: [2012] UKUT 277 (TCC); [2010] STC 2443.