The company appealed against a finding that its stamp duty land tax saving scheme was ineffective. The court was now asked whether a sale on by a company to a newly formed partnership comprising itself and four other partners of a lease which the company had already contracted to acquire could take advantage of paragraph 10 of Schedule 15 which would (in the circumstances of the case) have had the effect of reducing to nil the liability to SDLT on a transfer of a chargeable interest from the partner to a partnership.
Held: The taxpayer’s appeal succeeded.
The paragraph 10 relief was not available because the statutory disregard of the completion of the first contract meant that the company which was the purchaser under the first contract with the original vendor never acquired a chargeable interest in the property which it was able to and did transfer to the partnership.
Lewison LJ said:
‘Section 43(1) defines a ‘land transaction’ as ‘any acquisition of a chargeable interest’. The focus is on what is acquired; not on what is disposed of. An acquisition can take place without any act of the parties. In my judgment, therefore, the fact that B acquires a chargeable interest as the result of an instrument giving effect to a transaction between him and A does not necessarily entail the proposition that the interest in A’s hands was itself a chargeable interest. If there is no land transaction, there cannot have been the acquisition of a chargeable interest. Although the word ‘vendor’ is defined by section 43 (4) it is notable that the word does not appear anywhere in section 44. Accordingly, I do not see any inconsistency between, on the one hand, accepting that the Company was entitled to an equitable interest (which is an interest in land in the real world) and, on the other, concluding that that equitable interest does not count as a chargeable interest for the purposes of SDLT while it is in the Company’s hands.
. . ..
30. Paragraph 10 of Schedule 15 is not so much concerned with the acquisition of a chargeable interest by a partnership as the transfer by a partner of a chargeable interest. It looks at a transaction from the perspective of the transferor. This contrasts with the general scheme of SDLT whose focus is on acquisitions, and looks at transactions from the perspective of the transferee. It seems to me to be clear that a partner cannot transfer a chargeable interest to a partnership unless he has a chargeable interest to transfer. But that is not to say that he cannot transfer an interest in land to a partnership; merely that it is not a chargeable interest in his hands. In the hands of the partnership, of course, it will be a chargeable interest and the time at which the partnership acquired that chargeable interest is ascertained by the application of section 44 (3) as modified by section 45 (3) .
. . ..
32. Accordingly, in my judgment the correct analysis is as follows.
33. When the Company entered into the contract with L and G section 44 (2) applied. Thus the Company was not regarded as having entered into a land transaction. Because a land transaction is defined as any acquisition of a chargeable interest, it must also follow that the Company was not regarded as having acquired a chargeable interest. It would acquire a chargeable interest on completion if section 44 (3) applied. Section 44 is intended to apply generally to the SDLT code.
When the Company entered into the contract with the Partnership section 45 (2) applied. Thus the Partnership was not regarded as having entered into a land transaction and, just as in the case of the Company, was not regarded as having acquired a chargeable interest. However, it was regarded as having entered into a contract for a land transaction, the consideration for which was so much of the consideration under the original contract as is referable to the subject-matter of the transfer of rights. In the jargon of the Act the contract between L and G and the Company is ‘the original contract’; and the contract between the Company and the Partnership is ‘the secondary contract’. Section 44 takes effect subject to modifications made by section 45.
Both the contract between L and G and the Company and the contract between the Company and the Partnership were completed on the same day. Thus on the facts of this case completion of the original contract took place at the same time as, and in connection with, completion of the secondary contract. But in those circumstances section 45 (3) says that the completion of the original contract must be disregarded. This disregard must be made for the purpose of section 44. The inevitable consequence of the statutory instruction to disregard completion of the contract between L and G and the Company for the purpose of section 44 is that section 44 (3) does not apply to completion of that contract. Since section 44 (2) has the result that the Company did not acquire a chargeable interest by entering into the contract with L and G, and on the facts of this case section 44 (3) does not apply to completion of that contract, it must follow that the Company did not enter into a land transaction for the purposes of SDLT. Accordingly for the purposes of SDLT the Company never acquired a chargeable interest.
When the contract between the Company and the Partnership was completed, section 44 (3) applied to the latter’s acquisition of a chargeable interest. Thus the effective date of its land transaction was the date of completion of its contract with the Company.
Paragraph 10 of Schedule 15 only applies if a partner transfers a chargeable interest to a partnership. Since, for the purposes of SDLT, the Company did not acquire a chargeable interest, that paragraph cannot apply. It follows, therefore that the Partnership is not entitled to rely on the exemption. It follows, therefore that the Partnership is liable to pay SDLT on the consideration which it gave for its own acquisition, as prescribed by section 50 and Schedule 4 paragraph 1.’
Maurice Kay VP CA LJ, Lewison LJ, Gloster L
 EWCA Civ 907,  WLR(D) 311,  31 EG 51,  STC 2150,  BTC 661,  1 WLR 1136,  3 EGLR 159,  STI 2570,  31 EG 5
Finance Act 2003 43
England and Wales
Cited – Project Blue Ltd v Revenue and Customs CA 26-May-2016
The company had purchased the site of the former Chelsea barracks. It was in turn owned by the Qatari sovereign wealth fund, which financed the purchase by a Sharia compliant loan scheme, which was implemented creating a lease and buy back . .
Cited – Project Blue Ltd v Revenue and Customs SC 13-Jun-2018
The purchaser of land created a sub-sale and leaseback with bank so as to fund the purchase in a manner which would comply with Islamic finance principles. The Court was now asked whether purchaser or the bank were liable for stamp duty land tax on . .
Lists of cited by and citing cases may be incomplete.
Updated: 01 November 2021; Ref: scu.513693