When purchasing a property or land, Stamp Duty Land Tax (SDLT) is normally paid on completion of a land transaction or where a contract has been substantially performed prior to completion. Taking early possession of a property is one of the ways a land contract can be substantially performed, which requires SDLT payment before completion.
In the case of Goldsmith Ltd and Mr Goldsmith v HMRC 2024, Mr Goldsmith exchanged a contract personally with the plan to convert the purchased property from one dwelling to three. He then transferred the contract to his newly formed company (Goldsmith Ltd) to formally complete the purchase. A clause in the contract allowed for limited hours of access to the property between exchange and completion for works to be carried out, however Goldsmith Ltd carried out far more work than was permitted. This included structural work (which the conditions of the contract explicitly stated were not permitted), and was so extensive that the company was considered to be trespassing on the property.
The tribunal ruled that “possession” under the Finance Act 2003 encompasses a broader definition than in property law, meaning the buyer must occupy the land as if they were the owner. Due to the restrictions in the license, the Judge determined that the buyer did not take possession, despite the work done.
Unfortunately for Mr Goldsmith, despite the decision that he did not take possession, he was still found to be personally liable to pay SDLT. When he assigned the contract to his company the purchase constituted a notional land transaction. The company paid the correct amount of SDLT but failed to submit the required return and claim sub-sale relief (which the company was entitled to). This therefore means that Mr Goldsmith effectively paid tax twice for the one transaction, as both he and his company had to pay.
The decision of this case is a cautionary tale to ensure that SDLT advice is taken out early in a potential transaction, especially where the buyer intends to enter occupation under a license or other agreement to carry out work. Whether or not possession has taken place is not straightforward and should be determined on a case-by-case basis to ensure that there are no unforeseen consequences.
At Bromleys, we are experts in commercial property transactions. We can assist you in finding the best way to structure your transaction, review proposals for early occupation before completion, and can advise you on any SDLT implications this may have. Call us today on 0161 768 1596 or email bromleys@bromleys.co.uk to speak to a member of the team.