Oisin Fanning v The Commissioners for HMRC

Section 45 of the Finance Act 2003 is a relieving provision addressing the transfer of contractual rights before completion. It applies where a subsale, assignment or other transaction makes a third party presently entitled to call for a conveyance. An unexercised option does not, without more, satisfy that description. The statutory secondary contract cannot be treated as the actual option agreement, and completion or substantial performance must relate to the real-world transaction contemplated by the statute. The separate treatment of options under section 46 does not alter that conclusion. The appeal was dismissed.

The appellant bought a flat from Glendale Enterprises Four Limited and, on the same day, granted San Leon Energy plc an option to purchase it. He filed his stamp duty land tax return on the basis that no tax was payable. The First-tier Tribunal rejected that analysis and upheld the assessment, alternatively applying section 75A of the Finance Act 2003: [2020] UKFTT 0292 (TC).

The Upper Tribunal dismissed the appeal on the ground that the option was not an “other transaction” within section 45(1)(b), while also considering the alternative arguments: [2022] UKUT 21 (TCC). The central issues before the Court of Appeal were whether the option fell within section 45(1)(b), what consideration arose under section 45(3), and whether the secondary contract had been substantially performed.

The Court of Appeal, in a judgment given by Lady Justice Falk and agreed by Lord Justice Lewis and Lord Justice Peter Jackson, dismissed the appeal.

1. Statutory approach. Taxing provisions must be construed purposively, having regard to statutory language, purpose, context and scheme. Deeming provisions are applied only so far as their statutory purpose requires, without producing unjust, absurd or anomalous results unless clear language compels that outcome. The court must also give effect to consequences that inevitably follow from the statutory fiction.
2. Scope of section 45. Section 45 operates by modifying section 44 of the Finance Act 2003, not in isolation. Section 45(1)(b) concerns an assignment, subsale or other transaction under which the further purchaser has in fact become entitled to call for a conveyance. It therefore contemplates a present entitlement at the time section 45 is applied. An option which has not been exercised confers no such entitlement and, without more, is not an “other transaction” within section 45(1)(b).
3. Secondary contract. The secondary contract deemed by section 45(3) is not the actual agreement between the original purchaser and the further party. Substantial performance or completion must be tested by reference to a real-world event. Completion requires a conveyance, while substantial performance involves possession or payment of a substantial amount of the consideration contemplated for completion. The land-law characterisation of an option as an equitable interest did not determine the statutory question.
4. Purpose and other provisions. Section 45 is intended broadly to prevent double SDLT charges where the person acquiring the use and enjoyment of land changes before completion. It is not a mechanism for avoiding SDLT where the original purchaser retains the enjoyment of the property. Section 46 treats the grant of an option as a distinct land transaction and did not materially alter the section 45 analysis.
5. Alternative grounds. The second and third grounds were unnecessary to the result. On the assumed hypothesis that section 45 could apply to an option, section 45(3)(b)(i) was not engaged because the parties were unconnected and San Leon had not provided any part of the purchase consideration. The option premium could not make the transaction substantially performed or completed for section 45 purposes. The alternative argument under section 75A was left undetermined, and no remittal was required.

1. Court of Appeal (Civil Division) — dismissed the appeal against the Upper Tribunal’s decision: [2023] EWCA Civ 263.
2. Upper Tribunal (Tax and Chancery Chamber) — rejected the appeal, holding that the option was not an “other transaction” within section 45(1)(b), and considered the alternative grounds: [2022] UKUT 21 (TCC).
3. First-tier Tribunal — rejected the appellant’s SDLT analysis and upheld the assessment, alternatively applying section 75A: [2020] UKFTT 0292 (TC).