Redmount Trust Company Limited v The Commissioners for HMRC

A document submitted in the prescribed form as a stamp duty land tax return may operate as a protective return where the purchaser is uncertain whether a return is required. HMRC may enquire into it, including whether tax is chargeable and the amount due.

The four-year time limit for assessments under Part 5 of Schedule 10 to the Finance Act 2003 does not apply to a closure notice completing an enquiry. Protection against an unnecessarily prolonged enquiry is provided by the taxpayer’s right to apply for a tribunal direction requiring HMRC to issue a closure notice within a specified period.

The appellant appealed against the First-tier Tribunal’s decision, reported as [2021] UKFTT 0443 (TC), which upheld HMRC’s closure notice amending the appellant’s SDLT return to show £294,000 due. An alternative discovery assessment had also been issued.

The appellant argued that its return was voluntary because the arrangements were said to provide sub-sale relief. It contended that HMRC therefore had no power to enquire into the return or issue a closure notice. It also argued that any closure notice was out of time under paragraph 31 of Schedule 10 to the Finance Act 2003.

1. The appeal was dismissed. The Upper Tribunal held that the enquiry into the appellant’s SDLT return was valid and that the closure notice was valid.

2. A purchaser may submit a protective return where it is uncertain whether the transaction is notifiable. Paragraphs 12 and 13 of Schedule 10 to the Finance Act 2003 permit HMRC to enquire into a return submitted in the prescribed form. The enquiry extends to anything contained in, or required to be contained in, the return which relates to whether tax is chargeable or the amount chargeable.

3. The reasoning of the Supreme Court in Project Blue Ltd v HM Revenue & Customs [2018] UKSC 30 applied by implication. A return that was not strictly necessary could nevertheless be the subject of an enquiry. The alternative construction would leave purchasers with no statutory means of protecting themselves from penalties or facilitating registration where the need to file a return was uncertain.

4. The Tribunal distinguished direct-tax decisions concerning returns filed without a prior notice to file. SDLT is a transactional tax with a different statutory structure and penalties for failing to file.

5. Paragraph 31(1) of Schedule 10 concerns revenue assessments under Part 5, including assessments under paragraphs 28 and 29. It does not impose a four-year limit on a closure notice under paragraph 23 of Part 3. The structure of Schedule 10, the absence of a time limit in paragraph 23, and the separate remedy in paragraph 24 supported that conclusion.

6. The Tribunal therefore did not determine whether the arrangements were effective to avoid SDLT or whether the alternative discovery assessment was valid and in time.

• Upper Tribunal (Tax and Chancery Chamber): appeal dismissed. The Tribunal upheld the FTT’s conclusions that the enquiry was valid and that the closure notice was not out of time.
• First-tier Tribunal (Tax Chamber): appeals against HMRC’s closure notice and alternative discovery assessment dismissed; decision reported as [2021] UKFTT 0443 (TC).