The case of Sajedi and others v Revenue and Customs Commissioners [2025] concerned two appeals by taxpayers against HM Revenue & Customs refusal to accept repayment claims for ‘overpaid’ SDLT of circa £110,000 and £74,000 respectively.
In both cases, the taxpayers had acquired new main residences (the 'New Residences') and paid SDLT based on the higher rates for purchases of additional dwellings (the 'Additional Dwellings Surcharge'). The Additional Dwellings Surcharge applied because the taxpayers had not disposed of their previous main residences prior to the purchases of their New Residences. It was and is still possible for individual taxpayers who have paid the Additional Dwellings Surcharge to recover the increased SDLT payable under the surcharge if, within three years of the purchase of a new main residence, various conditions can be met including, the relevant taxpayer disposing of a major interest in their previous main residence.
Sometime after the purchases of the New Residences, the taxpayers entered into planning to dispose of a 1% interest in their old main residences to their respective spouses, in order to enable them to reclaim the surcharge paid on the purchases of their New Residences.
The only issue between the parties was whether new legislation introduced after the taxpayers purchases of the New Residences but prior to the implementation of their planning, would apply to defeat it. Under the new legislation, in addition to disposing of a major interest in the old main residence, the purchaser must not retain a major interest in the old main residence. The First-tier Tribunal ruled that the new legislation did not apply and the taxpayers presumably thought that their planning had worked. Unfortunately however, the tribunal took the view that ‘the entire appeal’ was before it and decided to take a closer look at the planning implemented. It was particularly focused on whether the taxpayers had disposed of a major interest in their old main residences.
The tribunal accepted that each of the 1% interests were major interests and so turned to examine the meaning of the word ‘disposed’. This term is not defined in the legislation and the tribunal said that its meaning must be taken from its context. Looking at case law, the tribunal concluded that it had to interpret the meaning of 'disposed' purposively with the aim of the Additional Dwelling Surcharge legislation in mind. The tribunal considered it contrary to the purposes of the legislation for the disposals to be of anything less than the whole of the respective taxpayers' previous main residences or for the disposals to be to their respective spouses.
The tribunal accepted that both sales of the 1% interests did give rise to technical disposals, however, given that the taxpayers continued to enjoy substantially the same benefits of ownership in respect of the old main residences as before the planning was implemented, it did not consider the disposals to have any 'real-world effect' or to be disposals within the meaning of the legislation. Consequently, both taxpayers' appeals were rejected.
This is an interesting judgement as the tribunal did not confine itself to the issues between the parties and instead, decided to examine the planning implemented in order to determine its effectiveness. Those seeking to litigate HMRC decisions should take note.
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