Stamp duty - tax avoidance - sub-sale arrangements ineffective in reducing chargeable consideration on acquisition of residential property

Keston and another v Inland Revenue Commissioners: ChD (Mr Justice Lightman): 27 January 2004

The vendor agreed to sell a residential property to K Ltd for 1.3 million.

By a sub-sale agreement of the same date, K Ltd undertook to arrange the transfer of the property to the taxpayers for a purchase price of 1.3 million, to be satisfied by a payment to K Ltd of 500, followed by 23 annual instalments of 500 each and thereafter the balance, with interest on the reducing capital sum.

On an adjudication by the Inland Revenue Commissioners under the Stamp Act 1891, ad valorem stamp duty was assessed at 52,400: 400 in respect of the instalment payments and 52,000 for the consideration paid under the sale agreement.

The taxpayers appealed.

Leolin Price QC and Evan Price (instructed by Taylor Walton, Luton) for the taxpayers; Rupert Baldry (instructed by the Solicitor, Inland Revenue) for the commissioners.

Held, dismissing the appeal, that the Stamp Act 1891 imposed the charge on instruments, not transactions; that the effect of section 4(a) (whereby an instrument relating to several matters was to be charged with duty in respect of each matter), section 56 (dealing with consideration consisting of periodical payments) and section 58(4) (providing relief for sub-purchasers in certain specified circumstances) was to impose unrelieved liability on both the consideration payable by K Ltd to the vendor and by the taxpayers, as sub-purchasers, to K Ltd; and that the taxpayers' attempt to reduce liability by arranging to interpose K Ltd, to effect the subsale and make instalment payments, was unsuccessful.