HM Revenue and Customs v DV3 RS Ltd Partnership

Stamp duty land tax is charged on land transactions rather than documents. In a sub-sale completed simultaneously with the original contract, section 45(3) of the Finance Act 2003 requires completion of the original contract to be disregarded for the purposes of section 44.

The original purchaser therefore never acquires a chargeable interest for stamp duty land tax purposes. A partnership relief which requires a partner to transfer a chargeable interest cannot apply, even though the partner transfers an equitable interest under general property law. The partnership is liable on the consideration for its own acquisition under section 50 and Schedule 4.

A company contracted to acquire a head lease for £65.1 million. It later agreed to sell the same interest, at the same price, to a limited partnership in which it held a 98% income share. Both contracts were completed through successive transfers on the same day.

The partnership claimed that Schedule 15 paragraph 10 of the Finance Act 2003 reduced the chargeable consideration to nil. The Upper Tribunal accepted that argument in [2012] UKUT 399 (TCC). HMRC appealed with the Upper Tribunal's permission.

The central issue was whether, after applying sections 44 and 45, the company had acquired and transferred a chargeable interest so that the partnership provision applied.

1. Appeal allowed. Section 45(3) of the Finance Act 2003 required completion of the original contract to be disregarded for the purposes of section 44. The company consequently never acquired a chargeable interest for stamp duty land tax purposes.

2. Sections 44 and 45 were to be construed by ordinary purposive principles. Schedule 15 was not a self-contained legislative island, nor did it prevail merely because it addressed partnerships. Section 45 equally addressed the special situation of sub-sales. The partnership's construction also ran against the legislative scheme because it made liability depend upon the intermediate conveyance, although stamp duty land tax is imposed on land transactions rather than documents.

3. The real contracts and transfers remained relevant to identifying the proposed transactions, determining completion and substantial performance, and deciding whether the sub-purchaser became entitled to call for a conveyance. Those real-world matters did not determine whether an interest counted as a chargeable interest under the statutory code. The concept of a chargeable interest operated within the stamp duty land tax scheme.

4. Entering the original contract did not cause the company to acquire a chargeable interest because section 44(2) applied. Although completion would ordinarily engage section 44(3), simultaneous and connected completion of the secondary contract activated the section 45(3) disregard. There was therefore no stage at which the company acquired a chargeable interest.

5. Schedule 15 paragraph 10 required a partner to transfer a chargeable interest. A person could transfer an interest in land under general property law without that interest being a chargeable interest in that person's hands. Because the company had no chargeable interest to transfer, paragraph 10 did not reduce the consideration.

6. The partnership acquired the chargeable interest when its secondary contract was completed. It was liable for stamp duty land tax on the consideration for that acquisition under section 50 and Schedule 4 paragraph 1. Gloster and Maurice Kay LJJ agreed with Lewison LJ.

1. Court of Appeal (Civil Division): HMRC's appeal was allowed unanimously. The Upper Tribunal's construction was rejected.

2. Upper Tribunal (Tax and Chancery Chamber): Henderson J held in [2012] UKUT 399 (TCC) that the partnership calculation in Schedule 15 applied and agreed with the taxpayer. The Upper Tribunal granted HMRC permission to appeal.