FTT finds planning permission not enough to secure MDR

In Ladson Preston Limited, AKA Developments Greenview Limited v HMRC [2021] TC08197, the First Tier Tribunal (FTT) held that planning permission was not capable of satisfying the requirement of being "in the process of construction" in order for Multiple Dwellings Relief (MDR) to apply.

• The hearing was for two sets of appeals. Each concerned the availability of MDR when assessing the amount of Stamp Duty Land Tax (SDLT) due. In each case, there was a lead appellant and behind that a group of appeals on the same basis:
  • Group one was concerned as to whether the existence of planning permission was enough to satisfy the statutory language of "is in the process of being constructed", in relation to whether physical works of construction or adaption had taken place on or before the Effective Date of Transaction (EDT).
  • Group two concerned works that had taken place but where HMRC did not agree that the statutory wording had been complied with.
• In both appeals, the appellant held the freehold title and planning permission had been granted.
• The first appellant, Ladson Preston Limited (LPL) had planning permission for two four-storey buildings including residential flats to be built on the land to be acquired. No changes to the land were made until after the EDT.
  • The appellant completed the SDLT return showing the property to be non-residential and self-assessed the correct amount of SDLT.
  • LPL's agent later wrote to HMRC in order to amend the return to claim MDR.
• The second appellant, AKA Developments Greenview limited (AKA) demolished existing commercial buildings to erected nine detached residential properties post the EDT, in line with planning permission granted before the EDT.
  • Boreholes were dug in the ground by AKA before the EDT and demolition started on the EDT, but after the transaction had been completed.
  • The SDLT return was filed showing the land was residential and the correct amount of SDLT was self-assessed on the basis that MDR applied.
  • The return was later amended to 'mixed-use' for residential and non-residential property.
• HMRC opened enquiries into both returns, closure notices were issued and the appellants both appealed these.

Neither appellant offered any evidence as to why planning permission should be construed as "in the process of being constructed".

• LPL contended that planning permission was the first step required in order for works to commence.
  • It was later accepted during the Tribunal that intention to start construction was required, as well as planning permission.
  • It was also accepted that LPL's original assertion that construction without planning permission was illegal was not true.
• AKA put forward the same arguments regarding planning permission as LPL. It was also argued that the boreholes showed that construction had begun.
  • The Tribunal used the same reasoning for the boreholes as the planning permission: the holes were not the subject matter of the transaction and could not have been transferred.

The FTT held:

• Multiple Dwellings Relief (MDR) can only be claimed where at the EDT, the subject of the transaction was an interest in at least two dwellings.
• A Dwelling is a building, or part of, and
  • used or suitable for use as a single dwelling,
  • is in the process of being constructed or adapted for such use.
• An interest in a dwelling must be something that can be acquired or sold and that does not include planning permission.
• Any works started after the transaction cannot form part of the subject matter of the transaction either. 

Both appeals were dismissed.

Useful guides on this topic

SDLT: At a glance, Stamp Duty Land Tax, rates & allowances
What is Stamp Duty Land Tax (SDLT)? What are the rates of Stamp Duty Land Tax (SDLT)? Stamp Duty Land Tax (SDLT) is paid on the purchase of an interest in land as a percentage of the purchase consideration. Different rates apply according to the type of property and the type of purchaser.

SDLT: Multiple Dwellings Relief
What is Multiple Dwellings Relief (MDR) for Stamp Duty Land Tax purposes? When does it apply and how is it claimed?

SDLT: Amending returns
How do I amend an SDLT return?  When can I amend an SDLT return?

External link

Ladson Preston Limited, AKA Developments Greenview Limited v HMRC [2021] TC08197