Pollen Estate Trustee Co Ltd & Ors v Revenue & Customs Commissioners (2013)
Where a charity acquired property, the exemption from stamp duty land tax provided by the Finance Act 2003 Sch.8 applied in respect of that proportion of the beneficial interest that was attributable to the undivided share held by the charity for qualifying charitable purposes.
The appellants (P and K), a trust company and a university college, appealed against a decision ((2012) UKUT 277 (TCC)) upholding the respondent Revenue's refusal to allow partial relief from stamp duty land tax (SDLT) in relation to various property acquisitions.
P was a trustee of a trust established under a will. There were over 100 beneficiaries of the trust: the two major beneficiaries were a charity and a hospital which was a Crown charity, but the remaining beneficiaries were not charities. The instant appeal concerned four commercial properties that P had bought on behalf of the trust. K was a charity. It operated a shared equity scheme under which it participated in the acquisition of homes for employees in return for an equitable interest in the property acquired. The employee in question in the instant appeal bought a flat with the help of a contribution by K to the purchase price, and executed a declaration of trust by which he declared that he held his property as to 46.3 per cent for K and 53.7 per cent for himself. The Revenue refused to grant relief from liability to pay SDLT in each case. On appeal, it was determined that if a charity acquired property in furtherance of its charitable purposes, or as an investment, it was entitled to relief against liability to pay SDLT on the purchase price, and the same applied if a non-charity bought the property as bare trustee for the charity; however, if a non-charity had a beneficial interest in the property in question, the charity was not entitled to any relief at all, not even in respect of the beneficial interest.
P and K argued that the tribunal had (1) identified the wrong interest in land as the basis of charge, and (2) adopted an unduly literal interpretation of the Finance Act 2003 Sch.8 para.1 applicable to acquisitions by charities.
(1) By virtue of the Law of Property Act 1925 s.34 and s.36, the starting point was that a conveyance to two or more persons took effect as a trust of land. Thus, for the purposes of SDLT, sch.16 para.1 was brought into play, which applied where a person acquired a chargeable interest as a bare trustee: the interest acquired by the trustees was deemed to be vested in the beneficiaries, and the acts of the trustees were deemed to have been the acts of the beneficiaries. The trustees acted collectively: it followed that for the purposes of SDLT the beneficiaries acted collectively. When the trustees exchanged contracts, or the contract was completed, the trustees collectively acquired the equitable estate in the land. As a consequence of sch.16 para.1, that estate was deemed to have been vested in the beneficiaries. The equitable estate thus acquired was both a chargeable interest, as defined by s.48(1), and also a major interest, as defined by s.117(2). Whether the beneficiaries were joint tenants or tenants in common in equity, they were, for the purposes of SDLT, jointly entitled to the equitable estate within the meaning of s.121. Accordingly, identifying the subject-matter of the transaction for the purposes of s.43(6) was done by reference to the equitable estate that had been collectively acquired. The chargeable consideration was the consideration given for that equitable estate, and it was that consideration by reference to which SDLT was to be levied. The tribunal had correctly identified the chargeable interest by reference to which SDLT was levied (see paras 39-41, 44 of judgment). (2) The tribunal had adopted an unduly literal interpretation of sch.8. Schedule 8 was to be read as follows: "a land transaction is exempt from charge to the extent that the purchaser is a charity and the following conditions are met". Thus exemption was available to the extent that the purchaser was a charity and to the extent that the conditions were met. The consequence of that reading of sch.8 was that a land transaction was partially exempt, but only to the extent of a charity's interest. Thus the exemption applied in respect of that proportion of the beneficial interest that was attributable to the undivided share held by the charity for qualifying charitable purposes. That reading gave effect to what must have been Parliament's intention with regard to the taxation of charities. Not to afford a charity relief in the circumstances would have been capricious (paras 47-49).
Appeal allowed in part
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26 Jun 2013
Court of Appeal
Laws LJ, McFarlane LJ, Lewison LJ
LTL 26/6/2013 :  3 All ER 742 :  STC 1479 :  BTC 606 :  STI 2298 :  27 EG 91 (CS) :  2 P & CR DG17 :  EWCA Civ 753