Commissioners of HM Revenue and Customs v LG Park HT1 Ltd and others

Taxation – Stamp duty land tax – Market value – Dispute arising as to market value of land for purposes of SDLT – Market value not only point in issue – Respondents’ applying to refer question of market value to Upper Tribunal – First-tier Tribunal refusing application – UT allowing respondents’ appeal – Appellant appealing – Whether UT erring in law – Appeal allowed In 2000, the respondent companies entered into an agreement with companies in the Shell group to develop a deep-water port and logistics site (the park) to be known as the “London Gateway”. In 2009, Shell agreed to grant 200-year leases over ten plots of developable park land to the respondents. In consideration for the grant of the plot leases, the respondents agreed to pay over £112.5m, and to grant Shell land options over the land covered by their respective plot leases. The respondents filed land transaction returns on the basis that the land transactions were an exchange within section 47 of the Finance Act 2003 because the plot leases had been granted, in part, in consideration for their granting options over the land in question. That required the chargeable consideration for the transaction to be the market value of the leases. An independent valuer valued them at £30.56m and the respondents relied on that valuation in making its stamp duty land tax (SDLT) return. The appellant commissioners issued closure notices, substituting chargeable consideration totalling £116.5m. The First-tier Tribunal (FTT) refused the respondents’ application to refer the market valuation of the leases to the Upper Tribunal (UT) pursuant to paragraph 45 of schedule 10 to the 2003 Act. The UT allowed the respondent’s appeal against that refusal and referred the question of market value pursuant to paragraph 45 while confirming that all other aspects of the appeals remained with the FTT: [2022] UKUT 178 (TCC). The appellants appealed. Held: The appeal was allowed. (1) The UT should not interfere with case management decisions of the FTT when it had applied the correct principles and taken into account relevant matters and left out of account irrelevant matters, unless the UT was satisfied that the decision was so plainly wrong that it had to be regarded as outside the generous ambit of discretion entrusted to the FTT. The UT had to exercise extreme caution before allowing appeals from the FTT on case management decisions. It was vital to uphold robust, fair case management decisions by the FTT and a high hurdle had to be overcome to challenge them successfully: Walbrook Trustees v Fattal [2008] EWCA Civ 427, Mannion v Ginty [2012] EWCA Civ 1667, Atlantic Electronics Ltd v HMRC [2013] EWCA Civ 651, Goldman Sachs International v HMRC [2009] UKUT 290 (TCC), HMRC v Ingenious Games LLP [2014] UKUT 62 (TCC), [2014] STC 1416 and Jalla v Shell International [2021] EWCA Civ 1559 considered. An appeal to the UT lay only a point of law. Where an error of law was identified, the UT might (but need not) set aside the FTT’s decision pursuant to section 12 of the Tribunals, Courts and Enforcement Act 2007. That gave the UT a broad discretion. However, a test of materiality still had a crucial, and usually decisive, role to play in the UT’s decision whether to set aside the decision of the FTT, and in the decision of the Court of Appeal if an error of law by the UT was established. What was meant by “material” was a case where the UT was satisfied that the error of law might (not would) have made a difference to that decision. While justice would normally require a decision to be set aside where there had been a material error in that sense, there would be no injustice in leaving an appeal to stand where the UT was satisfied that the error was immaterial: Degorce v HMRC [2017] EWCA Civ 1427; [2017] STC 2226 considered. (2) Paragraph 45 of schedule 10 to the 2003 Act applied only where an appeal had been notified to the FTT and it required any “question of the market value of the subject matter of the land transaction” to be transferred to the UT. The question of when to refer an issue of valuation was a case management decision for the FTT. Pursuant to paragraph 45, any question of the market value of the subject matter of a land transaction that arose on an appeal to the FTT had to be referred to the UT. All other matters were for the FTT which had to exercise its powers in a way that sought to give effect to the overriding objective set out in the FTT’s rules, to deal with cases fairly and justly, having regard among other things to the need to deal with cases in a proportionate manner and to the need to avoid unnecessary delay. The UT’s approach to paragraph 45 here involved an error of law. It appeared to give the impression that there was some form of presumption in favour of an immediate referral. There was no such presumption. Further, the UT did not adhere sufficiently to the need for caution in interfering with case management decisions of the FTT and the importance of determining whether any error of law was in fact material. Therefore, the UT’s decision set would be aside. (3) Read as a whole, the FTT decision did not disclose a material error of law. The emphasis was on whether it would be appropriate to refer the issue of valuation before other issues were decided, and the FTT referred to not being required to refer valuation while there were still questions to be considered. But importantly, the FTT decided that it would not be in accordance with the overriding objective to refer the question of valuation at that stage, which was well within the ambit of its discretion. The FTT was being asked to make a reference to the UT at an extremely early stage of the proceedings, and before the appellants had even been required to produce a statement of case. Having concluded that the respondents wished to raise matters that were properly within the sole jurisdiction of the FTT, it could not be criticised for refusing to accede to the respondents’ argument that market value was nonetheless the sole issue for the purpose of deciding whether an immediate reference should be made. Hui Ling McCarthy KC, Michael Ripley and Edward Hellier (instructed by HMRC Solicitor’s Office and Legal Services) appeared for the appellants; Rupert Baldry KC and Quinlan Windle (instructed by Norton Rose Fulbright LLP) appeared for the respondents. Eileen O’Grady, barrister Click here to read a transcript of Commissioners of HM Revenue and Customs v LG Park HT1 Ltd and others