The lead appellants, Mr and Mrs Brosch, brought the appeal with a total of 92 property purchasers who had used two stamp duty land tax (SDLT) schemes promoted by Cornerstone Tax Advisers. They were disputing discovery assessments issued by HMRC for underpaid SDLT.

The schemes were designed to take advantage of the rules that applied to sub-sales of real property in section 45 of the Finance Act 2003 (FA 2003) to reduce SDLT liability on the purchase of a residential property.

The first, known as ‘Jeepster’, involved a sub-sale by way of an assignment or gift between unmarried couples, and the second, ‘Hummer’ involved a sub-sale by way of an assignment or gift between married couples. As a result of using the schemes, the full liability to SDLT was not recorded on the land transaction returns filed by each of the appellants.

The procedural ruling in the First Tier Tribunal did not elaborate on the detail of the schemes, except to confirm that HMRC had found that the schemes, which were used  between 2007 and 2009, were ineffective.

To illustrate the scope of the scheme to reduce tax liability, in one instance an unmarried couple received a discovery assessment from HMRC for the amount of £48,018.75 in unpaid SDLT after using the Jeepster scheme. The tax demand was issued on the basis that the couple had paid £1,250,000 for a property, rather than the £198,215 they claimed was the purchase price in their SDLT return.  

On 28 February 2022, HMRC made an application to strike out the appeals as the disclosure notes provided by all the appellants were not adequate to satisfy the requirements of paragraph 30(3) of schedule 10, FA 2003; and some of the appellants had not provided any documentation to support the claim that they implemented an SDLT avoidance scheme.

HMRC argued that as a result, the underpayment of tax was due to the negligent conduct of the appellants and/or persons acting on their behalf; and there was no reasonable prospect of them being able successfully to argue that the schemes could work as it was clear that the schemes were ‘ineffective’.

The tribunal found that there had ‘not been a full disclosure of the facts, or relevance of any particular facts, in this case even though the Upper Tribunal in Hicks observed that even in “a relatively simple case” (which is not how I would describe the present case), a taxpayer should still provide “a full disclosure of the factual position”.

‘Nothing in the SDLT returns would alert a hypothetical officer or lead him or her to infer that there was any insufficiency or loss of tax. If the SDLT returns had been considered without reference to the disclosure note there is nothing to suggest that the total consideration was not the purchase price of the property concerned. If the disclosure note had been taken into account it might suggest that the purchasers had benefited from sub-sale relief’.

Accordingly, the appeal was dismissed. The appellants have 56 days to appeal.

FTT ruling, Mrs E F Brosch & Mr R N Brosch v HMRC  [2023] UKFTT 945 (TC) [31 Oct 2023]