UK and International Tax news
Project Blue And SDLT Avoidance
Saturday 31st January 2015
The Upper Tribunal has recently issued its decision in the important case of Project Blue Ltd (formerly Project Blue (Guernsey) Ltd v HMRC) [2014 UKUT 0564], given it is the first case to be heard on the statutory interpretation of s.75A FA2003.
PBL had agreed to buy land – the old Chelsea Barracks – from the MOD for £959m and simultaneously sold it on to MAR, a Qatari bank, which provided Sharia compliant financing, for a price of £1.25bn to cover the acquisition cost plus further building costs. MAR leased the land back to PBL. There were also put and call options to provide for the eventual transfer of the property back to PBL.
PBL’s view was that there was no SDLT payable on its initial purchase or the subsale to MAR given s.45 and s.71A FA2003. which provides for an exemption from SDLT for the style of alternative financing in the later steps of the transaction.
The FTT however found in 2013 that there was a charge under s.75A on PBL of 4% of £1.25bn, being £50m. Both sides appealed to the Upper Tribunal on whether s.75A imposes a charge and if it does, who is liable and for how much.
S.75A applies where one person (V) disposes of a chargeable interest in land and another person (P) acquires either it or a chargeable interest deriving from it, a number of transactions are involved in connection with the disposal and acquisition, and the sum of the SDLT payable in respect of the scheme transactions is less that the amount that would be payable on a notional land transaction effecting the acquisition of V’s interest by P.
The UT found that SDLT was due, under s.75A, on £959m and payable by PBL although this was not a unanimous decision. Mr Justice Morgan was the presiding judge and his vote prevailed. Whilst Judge Howard Nolan agreed that it was PBL that was liable to the SDLT, he considered that the tax should have been 4% on £1.25bn.
Given the above, it is expected that further appeals will be made.
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