Property Update – March 2015

This month has seen the publication of some new tax cases that look further at two of the most common tax issues that arise on property transactions – namely trading v investment for direct tax purposes and transfer of going concern for VAT purposes.

Next month, we will provide a Budget update highlighting the main implications of the announcements made to the property market.

If you would like to discuss any property tax queries, contact Caroline Fleet on 0845 4900 509 or email

This month’s property news…


Developers can hold property as investment – Terrace Hill (Berkeley) Ltd v HMRC [2015]

In a decision released on 18 February 2015, the First-tier Tribunal examined a property transaction entered into by Terrace Hill, a well-known property developer to determine whether the property was held on trading or investment account. This matter was particularly relevant as there was a capital loss scheme in place which would, if the transaction was a capital transaction, effectively eliminate the tax due on the disposal of that interest.

The First-tier Tribunal concluded that the decision was ‘finely balanced’, but held the transaction was capital. In coming to their conclusion the tribunal was clearly impressed by the witness evidence provided by the company’s officers, who were able to provide clarity on the matters, where there was a perceived weaknesses in the evidence the company had maintained.

The case acts as another reminder that it is vital to have clear contemporaneous evidence to support the position taken by the taxpayer, particularly where the stance taken by them is different from the normal presumed position.


Transfer of Going Concerns – Royal College of Paediatrics and Child Health & others v Revenue and Customs Commissioners [2015]

Vaughn Chown Head of VAT, considers the recent tribunal decision, which resulted in the denial of transfer of going concern on a property sale. This case is an interesting example of the complexities involved in identifying transfers of going concerns. For a full analysis, please click here.


Welsh Government announced consultation of Land and Building Tax

In mid-February 2015, the Welsh Government published proposals for a land transaction tax (‘LTT’) to replace Stamp Duty Land Tax (‘SDLT’) in Wales from April 2018. The consultation looks at the breadth of land transactions covered, the entities liable to the tax as well as the compliance process. The consultation is open to 6 May 2015.

Unsurprisingly, many of the proposals replicate the SDLT regime, but the Welsh Government is keen to tailor the LTT for the Welsh property market and to create a better regime for Wales. One suggestion being made is to include a motive test to determine whether a scheme is avoidance, as this would help reduce the uncertainty in how s75A FA2003 applies.


Guidance published on Scottish LBTT

In advance of its introduction on 1 April 2015, HMRC have published guidance on the forthcoming rules for Scottish land and building transaction tax (‘LBTT’) and the transition from SDLT.

Exceptionally, SDLT will continue to apply to transactions where the effective date is on or after 1 April 2015, where the subject matter of the transaction consists of or includes interests in land situated in Scotland and which are effected in pursuance of a contract entered into and substantially performed on or before 1 May 2012; or effected in pursuance of a contract entered into on or before that date and not specifically excluded.


Latest statistics show fall in the level of home ownership

The Government has recently published the latest edition of the English Housing Survey, an ongoing national survey examining people’s housing circumstances. The latest findings show that the owner occupied sector remains the largest tenure, although as a sector its size has continued to decline so that it is now at its lowest level in three decades.

Interestingly, also within this sector, for the first time, the proportion of households who owned outright was larger than the proportion who owned with a mortgage. In respect of the rented sector, the private rented sector continues to grow and remains larger than the social rented sector. There are also concerns raised about the lack of quality stock available within the rented sector increasing pressure in the housing market. With a general election looming, we expect housing demands and supply to continue to be a matter of considerable political debate.


Making the press…

In the latest edition of ‘New Developments’ Caroline Fleet looks back at the main tax changes announced in 2014 that property developers need to be aware of and also looks at what to expect in 2015. Click here to read her article.