First-tier Tribunal (Tax)

[2011] UKFTT 193 (TC)

TC01062

Appeal number: TC/2010/09311

LAND TRANSACTIONS – Penalty for failure to deliver a land transaction return by the filing date (Finance Act 2003 Sch 10 para 3) – Whether return delivered by the due date – Whether a reasonable excuse for failure to do so (Finance Act 2003 s.97) – Appeal allowed

FIRST-TIER TRIBUNAL

TAX

MR STUART WILLIAM BROUGHALL Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS Respondents

TRIBUNAL: DR CHRISTOPHER STAKER (TRIBUNAL JUDGE) DR MICHAEL JAMES (TRIBUNAL MEMBER)

The Tribunal determined the appeal on 10 March 2011 without a hearing under the provisions of Rule 26 of the Tribunal Procedure (First-tier Tribunal)(Tax Chamber) Rules 2009 (default paper cases) having first read the Notice of Appeal dated 17 December 2010, and HMRC’s Statement of Case submitted on 14 January 2011.

© CROWN COPYRIGHT 2011

DECISION

1.     This is an appeal against a penalty imposed pursuant to paragraph 3 of Schedule 10 of the Finance Act 2003 (the “Act”) in respect of the failure by the Appellant to deliver a land transaction return by the filing date.

2.     Under s.76(1) of the Act, in the case of every “notifiable transaction” the purchaser must deliver a land transaction return to HMRC within 30 days after the “effective date” of the transaction. 

3.     Under paragraph 3 of Schedule 10 to the Act, where a person required to deliver a land transaction return does not do so by the filing date, but does do so within 3 months of the filing date, that person is subject to a flat-rate penalty of £100.  However, under s.97 of the Act, the person will be deemed not to have failed to deliver the land transaction return by the filing date if he or she had a reasonable excuse for not doing so, and if he or she did do so without unreasonable delay after the excuse ceased.

4.     On 23 June 2010, Appellant purchased a property in Milton Keynes.  He acquired both leasehold and freehold titles to the property.  It has not been disputed in this appeal that the purchase of the leasehold title and the freehold title were each “an acquisition of a major interest in land”, and that therefore each was a “notifiable transaction” by virtue of ss.77 and 117 of the Act. 

5.     On 29 June 2010, the Appellant or his agent submitted a land transaction return (form SDLT1) showing both the freehold and leasehold title numbers, and stating the vendor of both to be Santander UK plc.

6.     On 30 June 2010, HMRC issued two separate SDLT5 certificates, one for the freehold title and one for the leasehold title.  The SDLT5 certificate is issued by HMRC based on the information contained in the land transaction return.  Both SDLT5 certificates accordingly indicated that the vendor was Santander UK plc.

7.     On 5 August 2010, after the deadline for the filing of the land transaction return, HM Land Registry rejected the application for registration of change of ownership of the property, as it was said that the SDLT5 for the freehold title incorrectly showed that the vendor to be Santander UK plc, rather than Guiness Midsummer Limited.  On the same day, the Appellant’s agent called the HMRC helpline, and was informed that a separate land transaction return (form SDLT1) was required for the freehold title, indicating the vendor to be Guiness Midsummer Limited.  This was submitted by the Appellant’s agent the next day, 6 August 2010.  On 20 September 2010, HMRC then issued the penalty notice, on the basis that the Appellant had failed to deliver the land transaction return (form SDLT1) in respect of the freehold title by the filing date, which was 23 July 2010.

8.     The issues in this case are first, whether the Appellant failed to deliver a land transaction return in respect of the freehold title by the filing date on 23 July 2010.  If the Appellant did fail to do so, the second question is whether the Appellant had a reasonable excuse for that failure.

9.     The Appellant’s case is that he did not intentionally submit the land transaction report late.  The Appellant says that the purchase of both leasehold and freehold titles was part of a single contractual transaction.  The evidence before the Tribunal includes a “contract for sale” dated 3 June 2010, describing the seller as “Santander UK PLC” and the buyer as the Appellant, and describing the property to be sold as “FIRSTLY the leasehold property comprised in a shared ownership lease ... registered under Title Number BM260508 and SECONDLY the freehold property registered under Title Number BM241298 ...”.  The Appellant submits that the land transaction return submitted on 29 June 2010 was in accordance with this contract for sale.  The Appellant’s case is that after HM Land Registry rejected the application for registration of the change in title, the Appellant’s agent contacted HMRC to rectify matters, and that the Appellant’s agent was informed “that no penalty would be incurred and if we did receive a penalty notice then we would have grounds against appealing the same after setting out details and relevant circumstances of the case”.  The Appellant’s agent states “We totally believed this to be a linked transaction and filed the returns on 29 June 2010 accordingly in accordance with the law”.

10.  The HMRC case is that the purchase of both the freehold and leasehold titles could have been notified in the same return if the vendor had been the same, but that because the vendors were different, separate returns had to be filed for each of the titles, and one of the returns was filed only after the filing date.  The Appellant’s agent has been unable to provide sufficient details of the conversation that he claims to have had with an HMRC official who stated that a penalty would not be incurred.  Relevant guidance was available and ignorance of the law is not a reasonable excuse.

11.  The Tribunal has given careful consideration to all of the material before it.  The evidence includes a TP1 form, indicating that the transferor of the freehold title was Guiness Midsummer Limited.  However, it is also the case that the contract for sale described the seller of both the freehold and leasehold titles as Santander UK plc.  It is apparent from the contract for sale that the purchase of both freehold and leasehold titles was part of a single contractual transaction in which, at least from the point of view of the contractual relations of the Appellant, Santander UK plc was the seller of both titles.  That is not to say that Santander UK plc was necessarily the vendor of the freehold title for all purposes.  However, it is to say that Santander UK plc was the vendor of the freehold title at least for certain purposes.

12.  The HMRC statement of case accepts that on 29 June 2010, which was before the time limit for doing so, the Appellant delivered a land transaction return showing both the leasehold and freehold title numbers, and stating the vendor of both to be Santander UK plc. 

13.  The Tribunal finds that the burden is on HMRC to establish that the Appellant failed to do by the filing date what he was required to do.  Only if HMRC discharges this burden does the burden shift to the Appellant to establish that he has a reasonable excuse for that failure.

14.  The HMRC statement of case sets out the legislative provisions on which HMRC relies.  According to these legislative provisions, the Appellant was required by the filing date to deliver a land transaction return in respect of the purchase of both the leasehold and the freehold titles.  On the accepted facts, the Appellant did by the filing date deliver a land transaction return in respect of both.

15.  If there are legislative provisions which required the Appellant to do more than he did, these provisions have not been cited to the Tribunal by HMRC.  HMRC contend that the Appellant could have filed a single return if the vendor had been the same for both titles, but not if the vendor for each of the titles was different.  HMRC have not cited any legislative provision supporting this contention.  HMRC contend that the return was required to state Guiness Midsummer Limited as the vendor of the freehold title.  Nor has HMRC cited any legislative provision in support of this contention.  On the material before the Tribunal, the Tribunal is not satisfied that the Appellant failed to deliver a return in respect of the freehold and leasehold titles by the due date.

16.  It is accordingly unnecessary to consider any issue of reasonable excuse.

17.  It follows that the appeal is allowed and the penalty is set aside.

18.    This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.  The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.