Recovering overpaid SDLT

It is now possible to recover overpaid SDLT as a result of the retrospective effect of the case of Robinson Family Limited v HMRC [2012] UKFTT360 (TC).

Following the 2012 decision of Robinson it is now accepted that in circumstances where the transfer of a property rental business as a going concern (TOGC) involves the transfer of property and the transferor retains a reversionary interest in the property (providing that the interest is small) then the transaction may be treated as a TOGC for VAT purposes.

If the transaction is treated as a TOGC for VAT purposes no VAT will be payable.

The facts of Robinson are as follows: In 2004 the appellant purchased a lease over land owned by BHC. The lease contained a prohibition on assignments. The appellant developed the land into six units. The appellant sought to sell one of the units to CJH, however was prevented from doing so because of the prohibition on assignment. The appellant therefore, was forced to transfer the unit by way of a sublease. The sale contract included TOGC provisions on the basis that the unit was subject to a proposed letting. On this basis the appellant attempted to treat the sale (by way of sublease) as a TOGC for VAT purposes. HMRC refused to accept that this was a TOGC. The tribunal, however, determined that the tax treatment should be determined by the substance, not the form of the arrangement and that the appellant had transferred a letting business as a TOGC to CJH.

Following this decision HMRC issued a Brief setting out the way in which it was possible to retrospectively apply for TOGC treatment on the basis of the decision in Robinson.

Whilst being able to recover overpaid VAT is useful, the more pressing issue is that of SDLT. If VAT is payable on a transfer then SDLT will be assessed on a VAT-inclusive, rather than a VAT-exclusive basis. As a result a transferee will have overpaid SDLT. The problem with the overpayment of SDLT was an exclusion at Case G of paragraph 34A(8) of schedule 10 to the Finance Act 2003 which excluded claims for overpaid SDLT if the SDLT was calculated in accordance with practice generally prevailing at the time.

On 15 April 2013 HMRC issued a Brief in relation to the recovery of SDLT as a result of the decision in Robinson. The Brief provides that the Case G exclusion does not apply to claims where the amount of chargeable consideration had been reduced as a result of a reduction in VAT following the decision in Robinson.

It is now, therefore, open to parties to retrospectively make use of the decision in Robinson and reclaim overpaid SDLT. Such claims, must, however, be made within four years of the date of the transaction. Click here to visit the 15 April 2013 Brief.

If you would like any further information about this issue, please contact me by emailing katie-ann.oleary@edwincoe.com.

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