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England and Wales Court of Appeal (Civil Division) Decisions |
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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> HM Revenue and Customs v DV3 RS Ltd Partnership [2013] EWCA Civ 907 (25 July 2013) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2013/907.html Cite as: [2013] STC 2150, [2013] WLR(D) 311, [2013] EWCA Civ 907, [2014] WLR 1136, [2013] STI 2570, [2013] BTC 661, [2013] 31 EG 51, [2013] 31 EG 5, [2013] 3 EGLR 159, [2014] 1 WLR 1136 |
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ON APPEAL FROM THE UPPER TRIBUNAL (TAX AND CHANCERY CHAMBER)
MR JUSTICE HENDERSON
FTC482011
Strand, London, WC2A 2LL |
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B e f o r e :
THE COURT OF APPEAL, CIVIL DIVISION
LORD JUSTICE LEWISON
and
LADY JUSTICE GLOSTER
____________________
THE COMMISSIONERS FOR HER MAJESTY'S REVENUE AND CUSTOMS |
Appellant |
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- and - |
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DV3 RS LIMITED PARTNERSHIP |
Respondent |
____________________
WordWave International Limited
A Merrill Communications Company
165 Fleet Street, London EC4A 2DY
Tel No: 020 7404 1400, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Roger Thomas (instructed by Olswang LLP) for the Respondent
____________________
Crown Copyright ©
Lord Justice Lewison:
Introduction
The facts
SDLT
"(4) References in this Part to the "purchaser" and "vendor", in relation to a land transaction, are to the person acquiring and the person disposing of the subject-matter of the transaction.
These expressions apply even if there is no consideration given for the transaction.
(5) A person is not treated as a purchaser unless he has given consideration for, or is a party to, the transaction."
"(1) This section applies where a contract for a land transaction is entered into under which the transaction is to be completed by a conveyance.
(2) A person is not regarded as entering into a land transaction by reason of entering into the contract, but the following provisions have effect.
(3) If the transaction is completed without previously having been substantially performed, the contract and the transaction effected on completion are treated as parts of a single land transaction.
In this case the effective date of the transaction is the date of completion.
(4) If the contract is substantially performed without having been completed, the contract is treated as if it were itself the transaction provided for in the contract.
(8) Where subsection (4) applies and the contract is subsequently completed by a conveyance
(a) both the contract and the transaction effected on completion are notifiable transactions, and
(b) tax is chargeable on the latter transaction to the extent (if any) that the amount of tax chargeable on it is greater than the amount of tax chargeable on the contract.
(10) In this section
(a) references to completion are to completion of the land transaction proposed, between the same parties, in substantial conformity with the contract; and
(b) "contract" includes any agreement and "conveyance" includes any instrument."
"(1) This section applies where
(a) a contract for a land transaction ("the original contract") is entered into under which the transaction is to be completed by a conveyance,
(b) there is an assignment, subsale or other transaction (relating to the whole or part of the subject-matter of the original contract) as a result of which a person other than the original purchaser becomes entitled to call for a conveyance to him, and
(c)
References in the following provisions of this section to a transfer of rights are to any such assignment, subsale or other transaction, and references to the transferor and the transferee shall be read accordingly.
(2) The transferee is not regarded as entering into a land transaction by reason of the transfer of rights, but section 44 (contract and conveyance) has effect in accordance with the following provisions of this section.
(3) That section applies as if there were a contract for a land transaction (a "secondary contract") under which
(a) the transferee is the purchaser, and
(b) the consideration for the transaction is
(i) so much of the consideration under the original contract as is referable to the subject-matter of the transfer of rights and is to be given (directly or indirectly) by the transferee or a person connected with him, and
(ii) the consideration given for the transfer of rights.
The substantial performance or completion of the original contract at the same time as, and in connection with, the substantial performance or completion of the secondary contract shall be disregarded except in a case where the secondary contract gives rise to a transaction that is exempt from charge by virtue of subsection (3) of section 73 (alternative property finance: land sold to financial institution and re-sold to individual).
(5A) In relation to a land transaction treated as taking place by
virtue of subsection (3)
(a) references in Schedule 7 (group relief) to the vendor shall be read as references to the vendor under the original contract;
(b) other references in this Part to the vendor shall be read, where the context permits, as referring to either the vendor under the original contract or the transferor."
"(1) This paragraph applies where
(a) a partner transfers a chargeable interest to the partnership,
or
It applies whether the transfer is in connection with the formation of the partnership or is a transfer to an existing partnership.
(2) The chargeable consideration for the transaction shall (subject to paragraph 13) be taken to be equal to
MV x (100 SLP)%
where
MV is the market value of the interest transferred, and
SLP is the sum of the lower proportions.
(5) Paragraph 12 provides for determining the sum of the lower
proportions."
Approach to construction
"For my part I take the correct approach in construing a deeming provision to be to give the words used their ordinary and natural meaning, consistent so far as possible with the policy of the Act and the purposes of the provisions so far as such policy and purposes can be ascertained; but if such construction would lead to injustice or absurdity, the application of the statutory fiction should be limited to the extent needed to avoid such injustice or absurdity, unless such application would clearly be within the purposes of the fiction. I further bear in mind that because one must treat as real that which is only deemed to be so, one must treat as real the consequences and incidents inevitably flowing from or accompanying that deemed state of affairs, unless prohibited from doing so."
"The modern approach to statutory construction is to have regard to the purpose of a particular provision and interpret its language, so far as possible, in a way which best gives effect to that purpose. This approach applies as much to a taxing statute as any other: Inland Revenue Commissioners v McGuckian [1997] 1 WLR 991, 999; Barclays Mercantile Business Finance Ltd v Mawson [2004] UKHL 51; [2005] 1 AC 684 (§ 28). In seeking the purpose of a statutory provision, the interpreter is not confined to a literal interpretation of the words, but must have regard to the context and scheme of the relevant Act as a whole: WT Ramsay Ltd v Commissioners of Inland Revenue [1982] AC 300, 323; Barclays Mercantile Business Finance Ltd v Mawson (§ 29). The essence of this approach is to give the statutory provision a purposive construction in order to determine the nature of the transaction to which it was intended to apply and then to decide whether the actual transaction (which might involve considering the overall effect of a number of elements intended to operate together) answered to the statutory description. Of course this does not mean that the courts have to put their reasoning into the straitjacket of first construing the statute in the abstract and then looking at the facts. It might be more convenient to analyse the facts and then ask whether they satisfy the requirements of the statute. But however one approaches the matter, the question is always whether the relevant provision of statute, upon its true construction, applies to the facts as found: Barclays Mercantile Business Finance Ltd v Mawson (§ 32)."
" schedule 15 should be read, construed and applied in the context of the SDLT legislation as a whole, and should not be treated as if it formed some sort of legislative island all by itself."
Discussion
"section 44 (contract and conveyance) has effect in accordance with the following provisions of this section "
"The substantial performance or completion of the original contract at the same time as, and in connection with, the substantial performance or completion of the secondary contract shall be disregarded except in a case where the secondary contract gives rise to a transaction that is exempt from charge by virtue of subsection (3) of section 73 (alternative property finance: land sold to financial institution and re-sold to individual)." (Emphasis added)
"All the points which I have so far considered seem to me to provide support, to a greater or lesser degree, for the Partnership's argument that the Company is to be regarded as the vendor under the secondary contract. If that is right, the remaining steps in the argument are relatively straightforward. On completion of the secondary contract, there was a transfer of a chargeable interest by the Company to the Partnership, so paragraph 10(1)(a) of Schedule 15 applies, albeit by reference to the deemed secondary contract rather than the actual facts of the sub-sale viewed in isolation. Section 45(3) says that the consideration (not, it should be noted, the chargeable consideration) for the transfer is £65.1 million. In order to ascertain the chargeable consideration it is necessary to turn to section 50(1), which states that Schedule 4 'makes provision as to the chargeable consideration for a transaction'. By virtue of paragraph 1(1) of Schedule 4, quoted above, the chargeable consideration is, 'except as otherwise expressly provided', the consideration in money or money's worth given for the subject-matter of the transaction by the purchaser or a person connected with him. In the present case, express provision to the contrary is made by paragraph 10(2) of Schedule 15, which therefore ousts and takes priority over the consideration for the secondary contract specified in section 45(3)." (Emphasis added)
Lady Justice Gloster:
Lord Justice Maurice Kay: