In 2006 a professor bought a house in London with assistance from the College which employed him. This was a "shared equity" scheme which Mills & Reeve helped to pioneer many years ago, and which is now widely used across the sector.
There are many variants to the scheme but basically the employer- university or college contributes part of the purchase price and takes a proportionate share in the equity. Usually the staff member has the opportunity to buy out the institution in the future.
The College is of course a charity and expected to claim SDLT charities relief on its equity share. Unfortunately the professor's solicitors, who were responsible for making the SLDT return, wrote to HM Revenue & Customs to ask their opinion. They responded that the College was not entitled to charities relief, because it had bought the house jointly with the professor. (The wording of the relief reads: "a land transaction is exempt from charge if the purchaser is a charity...").
After unsatisfactory correspondence, the College appealed against HMRC's decision. Many colleges and universities were affected by the case and were closely following the outcome. Mills & Reeve managed to put together a consortium of twenty institutions to support the legal challenge.
Years passed. The HMRC Stamp Office moved offices and lost the file. Finally, after increasingly strident letters from Mills & Reeve, the case came before the First-Tier Tribunal early in 2011. Months later, the Tribunal's decision was published. Victory! Sadly, however, the electronic version of the judgement was littered with bubble comments from another Tribunal judge, who just happened to have been a visiting professor at the appellant College! HMRC cried foul and the judgement was set aside. The case was referred on to the Upper-Tier Tribunal and was heard by the President of the Tribunal himself, Mr Justice Warren.
By this time it was clear that HMRC had bigger fish to fry. A case was pending (Pollen Estates) on similar facts where a seven-figure sum of SDLT was at stake, and this was joined with our case for the two to be heard together. Hearing the cases in March 2012, Warren decided in favour of HMRC. He found that the College and the professor had together acquired a single property interest - the equitable interest to the entire estate in which they each held an undivided share. This was the key property interest which was relevant for assessing the SDLT. Warren rejected the college's argument, powerfully submitted by our Counsel Andrew Hitchmough, that the College and the professor acquired separate property interests for SDLT purposes. However the hearing did flush out the important concession from HMRC that there was no identifiable policy reason why the legislation should deny charities relief from SDLT when they made joint purchases.
All was not lost, however, Warren's judgement, learned as it was, relied very heavily on an indirect analysis of the SDLT provisions through examination of the administrative sections, particularly section 103 Finance Act 2003. The key operative sections (sections 43-50) were barely looked at. The consortium of colleges and universities stood firm, as did Pollen Estates, and both parties appealed to the Court of Appeal.
In the Court of Appeal hearing in June 2013, help came from an unexpected quarter. The Bench suggested a purposive reading of the charity relief ("land transaction is exempt from charge to the extent that the purchaser is a charity…"). Thus even if it was agreed that the College and the purchaser acquired a single property interest, the College's share would still qualify for relief. For relief to be denied in these circumstances, the Court held, would be "capricious". Gnashing their teeth, HMRC withdrew in confusion. Will they appeal to the Supreme Court? Only time will tell.
Back in the real world, the professor has long since sold his house and moved elsewhere …