LG Park HT1 Limited & Ors. v The Commissioners for HMRC

Under paragraph 45 of Schedule 10 to the Finance Act 2003, a disputed question of the market value of the subject matter of a land transaction in an SDLT appeal must be referred to the Upper Tribunal (Lands Chamber). The provision is engaged even though other issues remain in the appeal.

The reference transfers only the valuation question. It does not transfer the appeal itself, which remains before the First-tier Tribunal. The First-tier Tribunal should not delay a mandatory valuation reference merely because other issues may arise, or because it hopes that they may arise. Questions of apportionment may, where appropriate, be addressed as part of determining the market value of the land interest.

The appellants were granted 200-year leases over plots forming part of the London Gateway logistics park. They returned SDLT on the basis of a valuation of the leases. HMRC issued closure notices concluding that the open-market value equalled the premiums paid.

The appellants appealed to the First-tier Tribunal and sought a reference of the valuation question under paragraph 45 of Schedule 10 to the Finance Act 2003. The First-tier Tribunal refused. It considered that questions concerning apportionment and the statutory exchange provisions first had to be resolved by it.

The Upper Tribunal considered whether that refusal involved an error of law, and whether a valuation reference was available where other questions remained in the appeals.

1. Appeal allowed. The First-tier Tribunal’s refusal of a reference involved a material error of law. Its decision was set aside and remade.

2. Paragraph 45 of Schedule 10 to the Finance Act 2003 is engaged in the framework of an existing appeal. Where market value is disputed, its effect is mandatory: the valuation question must be determined by the Lands Chamber. It does not require market value to be the only issue remaining in the appeal.

3. The statutory scheme transfers only the discrete valuation question. It does not transfer the substantive SDLT appeal to the Lands Chamber. Other matters, including the construction and scope of the closure notices, remain for the First-tier Tribunal.

4. The First-tier Tribunal was entitled, as a case-management matter, not to determine the scope of the closure notices at the interlocutory hearing. But it erred by treating the possible apportionment issue as a sufficient reason to refuse the reference. The closure notices and their context strongly indicated that valuation was central, and the opposing party had not established a material additional issue which justified withholding the reference.

5. Apportionment may sensibly be addressed by the Lands Chamber as an aspect of determining the market value of the leases. The Upper Tribunal directed a reference of the market-value question. The closure-notice appeals otherwise remained before the First-tier Tribunal, which could manage them with the related discovery-assessment appeals.

• Upper Tribunal (Tax and Chancery Chamber): allowed the appeal from the First-tier Tribunal’s refusal to make a valuation reference, set aside that decision, and directed a reference to the Lands Chamber.

• First-tier Tribunal (Tax Chamber): refused the appellants’ application for a reference under paragraph 45 of Schedule 10 to the Finance Act 2003.