The recent case of A Sajedi and others v HMRC [2025] UKFTT 297 (TC) in the UK First-tier Tribunal ("FTT") is an interesting example of a UK taxation tribunal intervening to decide a litigated matter on grounds that neither the appellant taxpayers nor the revenue authority had argued.
In the course of reaching its decision, the FTT considered certain property disposals and whether evidence had been provided to the FTT "that establishes a real world disposal".1 But how far could, and should, such a purposive construction of the relevant tax legislation extend?
Background
Since 2016, individuals purchasing a second home have paid a higher surcharge rate of UK stamp duty land tax ("SDLT"), being the tax applicable to purchases of land and real estate in the UK. The higher surcharge rate does not apply where the new, second, home is "a replacement for the purchaser's only or main residence".2 That higher surcharge rate could, broadly speaking, be reclaimed where a taxpayer subsequently disposes of their original home in the three years after the purchase of their second home. After 22 November 2017, new SDLT anti-avoidance rules required that, in order to reclaim the surcharge, the disposal of the original property could not involve the purchaser (or their civil partner or spouse) retaining "a major interest" in the original property.
Before the 22 November 2017, an individual couple jointly purchased a new residential property as their main residence (the "New Property"), and paid SDLT based on the higher surcharge rate of SDLT, owing to the couple still owning their previous main residence (the "Old Property") at the point of acquisition of the New Property. Towards the end of the three year period, and after 22 November 2017, one of the partners transferred a 1 per cent. interest in the Old Property to the other partner by way of a declaration of trust, in order to claim that the transfer constituted a disposal of a major interest in the Old Property, which was required for the reclaim of the higher surcharge rate of SDLT. HMRC denied the reclaim by the taxpayers of the higher rate surcharge of SDLT that had been paid on the acquisition of the New Property.
Transitional Rules
Both the taxpayer appellants and HMRC focused their arguments on the technicalities of whether the new SDLT rules, having effect from 22 November 2017, prevented a reclaim of the surcharge.
The FTT agreed with the appellant taxpayers on this issue. SDLT was a tax which operates in respect of acquisitions.3 The FTT needed only to look at the date of acquisition of the New Property to decide if the surcharge applied. As the New Property was acquired before the key date of 22 November 2017, the surcharge could (ostensibly) be reclaimed by the taxpayers.
If this had been the only element of the decision, the case would have been unexceptional.
Disposals in the "real world"
The FTT went further, however. There were other statutory conditions which were included in the legislation governing the reclaim of the SDLT surcharge.4 Those other statutory conditions had not been the focus of the opposing counsels' litigation before the FTT.
Indeed, the FTT stated that counsel for both litigating parties had made the "error" of assuming that the parties could agree matters of law relating to the other statutory conditions.5 Determination of matters of law was a task for the FTT, and that assertion led the FTT to consider those other conditions.
The FTT asked whether the condition - "disposes of a major interest" in land – had been satisfied by the taxpayers. The transfer of the 1 per cent. share in the Old Property freehold could, the FTT concluded, be a "major interest". However, the term "disposes" was not defined in the SDLT legislation. The FTT stated that they needed to view the word "disposes" purposively, and looked towards case authorities which addressed certain tax avoidance arrangements, including W. T. Ramsay Ltd v Inland Revenue Commissioners [1982] AC 300, and even an American case, Gilbert v Comr of Internal Revenue (1957) 248 F 2d 399, 411.6 The FTT concluded that:
"We consider that the words "disposes of a major interest" must be taken to be concerned with transactions that had a real world impact on the rights and obligations of the parties consistent with the notion of a replacement of an only or main residence."7
Transactions which "do not appreciably affect the beneficial interests of the parties or do not meaningfully change the character of the parties' relationship to the property" were not, in that context, "disposals".8 The FTT had not received evidence which established a "real world disposal". Nor was the FTT persuaded that there was a change in the character of ownership by the taxpayers in the Old Property. The transfers were "something that might be described as a technical disposal but without any real world effect".9
The FTT therefore denied the taxpayers' appeal. While this line of argument was not advanced by either party in the litigation, the navigation of the FTT to this decision is perhaps unsurprising, given the contrived nature of the transfers effected regarding the Old Property.
How do you make a disposal in the "real world" of a 1 per cent. share?
As often with case authorities in which the arrangements described by the court or tribunal appear to be artificial or contrived, the reader is left with a decision which is hard to disagree with in totality but which raises questions for other transactions. The FTT's decision was motivated by an approach to identify the purpose of the relevant statutory provisions. Transfers which were not "real world" disposals could be ignored under those statutory conditions. Yet, such transfers were not inherently a sham which could be voided by a court under English law.
The transfers being effected were simply transfers of a low share of value – the 1 per cent. of the interest in the Old Property. The result was that a small value transfer could be ignored if it was a "pure paper transaction"10 without an intention to alter the reality of the taxpayers' position. This seems hard to equate with the FTT's conclusion that the 1 per cent. share of the Old Property was a "major interest", and also with the fact that severing the couples' joint tenancy on the transfer of that share remained a valid contractual transfer with lasting legal consequences.
Conclusion
The FTT's approach in A Sajedi and others v HMRC might be confined to its facts in identifying a "disposal" in the context of SDLT legislation. However, the decision is a warning when documenting legal relationships which – as the FTT would describe – might potentially be treated as being "pen and paper transactions" which are divorced from the "real world".
Footnotes
1. Paragraph 148 of A Sajedi and others v HMRC 2025] UKFTT 297 (TC) ("Sajedi").
2. Paragraph 3(5), Schedule 4ZA, Finance Act 2003 ("FA 2003").
3. Paragraph 58 of Sajedi.
4. Such statutory conditions included paragraph 3(7)(b), Schedule 4ZA, FA 2003.
5. Paragraph 97 of Sajedi.
6. Paragraphs 121 and 135 of Sajedi.
7. Paragraph 143 of Sajedi.
8. Paragraph 143 of Sajedi.
9. Paragraph 148 of Sajedi.
10. Paragraph 147(1) and (2) of Sajedi.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
