The billionaire brothers, Christian and Nicholas Candy have lost their stamp duty land tax (SDLT) battle against HMRC at the Upper Tribunal and have been ordered to pay almost £4m tax on their £68m property purchase
The Upper Tribunal ruled in favour of HMRC, that property developers Christian Candy, 46, and Nicholas Candy, 48, had to each pay £1.92m on stamp duty land tax on a property they had bought in West London.
HMRC appealed to the Upper Tribunal after the First Tier Tribunal (FTT) ruled in favour of the property developers. The grounds for HMRC’s appeal was that the FTT had misunderstood the relationship between Section 44 and Schedule 10 of Finance Act 2003 which their decision was based upon.
Christopher and Nicholas Candy are the founders of Candy London, a luxury interior design and development management company. The brothers are considered to have a net worth of around £1.5bn.
The case arose after Christian Candy agreed to purchase Gordon House from the Royal Hospital Chelsea in 2012 where he exchanged contracts, consisting of two lease agreements for £48m, which was paid in October, and then £20m.
Christian Candy began substantial building work, worth £27m, on the property before finishing the purchase, this included a 60ft swimming pool and a cinema. The works triggered the ‘substantially performed’ clause under section 44 of the Financial Act 2003 which meant that Christian Candy had to pay the stamp duty tax levy of £1.92m.
A contract for a property is ‘substantially performed’ when the purchaser, or a person connected with the purchaser, takes possession of the whole, or substantially the whole, of the subject matter of the contract, or a substantial amount of the consideration is paid or provided.
After paying the levy Christian Candy decided not to move into the property and gave it to his brother Nicholas Candy, who completed the works and then completed the purchase. Due to this, Nicholas Candy became liable to pay the stamp duty tax levy of £1.92m again.
In April 2014, Christian Candy made an application to HMRC under Section 44 of the Finance Act 2003 for the repayment of £1.92m stamp duty land tax on the £48m that he had paid in October 2012 in respect of the contract he had entered.
The application for repayment was amended on the land transaction return and HMRC rejected the amendment to which Christian Candy appealed.
Christian Candy tried to claim a refund because he had not completed on the property, under Schedule 10 Finance Act 2003, a time limit of 12 months is imposed in which a stamp duty land tax return can be amended, with the time running from the filing date for the return. The opening words can be interpreted that the strict time limit is subject to an exception if or where another provision has ‘otherwise provided’.
Christian Candy had 12 months to transfer the ownership but this process took 18 months.
The FTT found that Christian Candy’s contract was rescinded or annulled or otherwise not carried into effect after the expiry of the normal 12-month time limit for amending the return relevant to the original chargeable transaction, and agreed with Christian Candy’s argument that his submission that the terms of section 44 of Finance Act 2003 were such that it operated as an exception to the normal 12-month time-limit.
The Upper Tribunal found that the reasoning for the idea that section 44 contained no time limit was that it focused on the fact that the word ‘afterward’ was used in the temporal sense. This, as the provision, would also make sense if the word was omitted as it must have been intended to achieve something. It was then said to follow that this was enough to constitute ‘other provision’ displacing the normal time limit to Schedule 10 of the Finance Act.
The Upper Tribunal stated: ‘In our view, it is plain that ‘afterward’ is being used in a temporal sense. It has no other sense. As explained, it is significant to overstate matters to say that every word in a statute must be capable of producing its substantive legal effect.
‘In that context, the inclusion of the word afterward is simply indicating that the contract which has been identified is, later or subsequently or afterward, rescinded or annulled.’
The Upper Tribunal reversed the decision by the FTT finding that section 44 does not operate as an exception to the normal time limit for amending land transaction returns and that the time limit is in place to prevent buyers from developing a property and then transferring ownership to avoid paying the stamp duty tax due.
Christian Candy can appeal the ruling, but no appeal has currently been put forward.
