REFS/2011/0186/0246/0258/0306

ADJUDICATOR TO HER MAJESTY’S LAND REGISTRY
LAND REGISTRATION ACT 2002

IN THE MATTER OF A REFERENCE FROM HM LAND REGISTRY

BETWEEN

(1)	THOMAS MATTHEW FINBARR NEILAND
(2)	RUTH ELLEN NEILAND
(3)	MARC LOPPAS
(4)	NICOLE EMMALINE LOPPAS
(5)	LOPPAS 194
(6)	RONALD CLIVE DUNBAR HICKS
(7)	RICHARD EBENEZER KIRU : Applicants

And

(2) THE COMMISSIONERS FOR HER MAJESTY’S REVENUE and CUSTOMS: Respondent

Properties:23 Woodcote Way Littleover Derby, land at back of 194d Queens Road Buckhurst Hill Essex, Neaves Cottage Stonepit Lane Henfield West Sussex and 2nd floor flat 130 Cavendish Road London SW12

Title Numbers: DY346614, EX859503, SX14781 and WSX 97390 and SGL205315

Made by: Professor Robert M. Abbey sitting as a Deputy Adjudicator at Victory House 30-34 Kingsway London WC2B 6EX on 9th December  2011

Applicants Representation: Mr Gavin Hamilton of Counsel.

Respondents Representation: Ms Hui Ling McCarthy of Counsel

___________________________________________________________________________

DECISION and DIRECTION
___________________________________________________________________________

KEYWORDS – (1) Application  to appeal direction- treated as applications to vary or review direction–effect of S.79(1) Finance Act 2003- HELD –– Application to vary dismissed- direction to continue as amended

THE APPLICATION
.
1.	The Applications in these four references all relate to properties where applications have been made to the Land Registry but where the applicants have not been registered as proprietors. They have not been so registered because when applying for registration the applicants have written letters accompanying their application and in which they say that the transaction is such that it was non-notifiable for Stamp Duty Land Tax (SDLT) purposes. As a result of which the Respondent (“HMRC”) objected to the applications. Thereafter the applications were referred to the Adjudicator for determination. Accordingly the dispute affecting the properties concerns whether the transactions sought to be registered are or are not notifiable having regard to section 79 of the Finance Act 2003.

2.	On 3 June 2011 I acceded to applications made by HMRC in letters dated 21 March 2011 to postpone the references before me, pursuant to Rule 20 of the Adjudicator to HM Land Registry (Practice and Procedure) Rules 2003 (as amended) by my following direction –

“….the proceedings be adjourned pending the outcome of HMRC’s application for permission to appeal to the upper tribunal against the decision of the Tax Chamber of the First Tier Tribunal in DV3 RS Limited Partnership v HMRC….and if permission is granted pending the outcome of that appeal”  (The June direction).

3.	The reason given for the June direction was that 

“I consider the interpretation of tax legislation is better dealt with by the Tax/Chancery Chamber of the Upper Tribunal rather than by me. The Adjudicator’s function is to deal with land registration matters”.

4.	The particular matters before me at this hearing are the applications made by the Applicants made to the Adjudicator by letters dated 20 July 2011 for permission to appeal the June direction under Rules 45(4). These applications have been treated as applications to vary or review the June direction pursuant to Rule 54. It therefore falls to me to hear the parties in relation to this review of the June direction

SUMMARY OF THE APPLICANTS’ ARGUMENT
5.	The Applicants’ case is set out in two documents which comprise the following: -
a.	The Applicants’ skeleton argument dated 25 November 2011
b.	The Applicants’ supplemental skeleton argument dated 6 December 2011

6.	At the hearing I was able to hear the Applicants’ argument made helpfully and clearly by their Counsel Mr Hamilton. He put forward several elements for making the application. The major element was that it was proper to complete the registration. At the core of this aspect of the matter is s. 79 of the Finance Act 2003. I will consider this section in detail later in this decision. Suffice it to say that the position put forward for the Applicants is that this section only applies to notifiable transactions and that the Applicants were not involved in any such transaction. As such the registration applications should proceed. Consequently the Applicants contend that the 4 applications can and should proceed to a hearing for the determination of whether there are proper grounds for HMRC to maintain its objections to the completion of registration of the transfers and charges. They say this because the completion of the registration is not in any way dependent on the resolution of the SDLT issue and that HMRC can resolve the SDLT issue pursuant to the Revenue’s powers under Schedule 10 to the Finance Act 2003.

SUMMARY OF THE RESPONDENTS’ CASE 
7.	The Respondents’ case is set out in its skeleton argument dated 28 November 2011. HMRC contends that the Applicants have each entered into land transactions which are notifiable pursuant to s. 77 Finance Act 2003 but have not done so. Accordingly HMRC are of the view that the Applicants are not entitled to register their land transfers without a certificate from the Revenue which will not be provided unless and until the relevant land transaction returns have been received. HMRC contend that the transactions in each case comprise the acquisition of a major interest in land that does not fall within one or more of the exceptions in s. 77A of the Finance Act 2003 (which is notifiable by virtue of s. 77 (1) (a) Finance Act 2003); and/or the transactions in each case comprise a notional land transaction under s.75A and which is notifiable by virtue of s. 77 (1) (d) Finance Act 2003. If either contention applies     HMRC say there is a notifiable transaction. If there is such a notifiable transaction then the transfers cannot be registered as a result of the effect of s. 79 (1) Finance Act 2003.

THE LAW
8.	At the core of this dispute lies what might be the effect of s.79 Finance Act 2003 and I set out below the details of this section with the underlining of my making:-

(1)A land transaction to which this section applies, or (as the case may be) a document effecting or evidencing a land transaction to which this section applies, shall not be registered, recorded or otherwise reflected in an entry made— 
(a) in England and Wales, in the register of title maintained by the Chief Land Registrar, 
…., 
unless there is produced, together with the relevant application, a certificate as to compliance with the requirements of this Part in relation to the transaction or such information about compliance as the Commissioners for Her Majesty’s Revenue and Customs may specify in regulations. .
This does not apply where the entry is required to be made without any application or so far as the entry relates to an interest or right other than the chargeable interest acquired by the purchaser under the land transaction that gives rise to the application.
(2)This section applies to every notifiable land transaction ….

9.	 Accordingly the Act requires SDLT returns in form SDLT1 for notifiable transactions. The Applicants assert theirs were not notifiable transactions. It is not for me to decide whether or not this is the case as this goes to the heart of the arrangement put in place by the Applicants (and others) and which is due to be considered elsewhere by those far better prepared to consider the SDLT aspect of this dispute. I however need to consider if the adjournment can be lifted to allow a full hearing. At that full hearing before the Adjudicator the tax scheme will not be considered but the conveyancing element will, namely, can the registration applications proceed. This is because the Land Registry have a statutory duty and if SDLT is payable but the Registrar has allowed or has been directed to register the transfers then the Registrar would be in breach of his duty not to register the dispositions until a certificate has been produced pursuant to s. 79 (1) Finance Act 2003.

10.	Part 4 of Schedule 10 of the Finance Act 2003 allows HMRC to issue a Revenue determination if no return is delivered. The details are 

25 (1 )If in the case of a chargeable transaction no land transaction return is delivered by the filing date, the Inland Revenue may make a determination (a “Revenue determination”) to the best of their information and belief of the amount of tax chargeable in respect of the transaction.
(2)Notice of the determination must be served on the purchaser, stating the date on which it is issued.
(3)No Revenue determination may be made more than six years after the effective date of the transaction.
Determination to have effect as a self-assessment
26(1)A Revenue determination has effect for enforcement purposes as if were a self-assessment by the purchaser.
(2)In sub-paragraph (1) “for enforcement purposes” means for the purposes of the following provisions of this Part of this Act—
(a)the provisions of this Schedule providing for tax-related penalties;
(b)section 87 (interest on unpaid tax);
(c)section 91 and Schedule 12 (collection and recovery of unpaid tax etc).
(3)Nothing in this paragraph affects any liability of the purchaser to a penalty for failure to deliver a return.

Such Revenue determinations have been issued in these four matters and this is relevant because HMRC contends that by doing so the Determination makes each transaction notifiable and as such s.79 (1) applies and the Registrations cannot proceed. This view is taken because HMRC say that on making the determination the burden is on the Applicants to show that the position is otherwise, i.e. that the transactions are non-notifiable.

MY DECISION
11.	Thus, having regard to the submissions made by Counsel for the parties and having considered the law to which they refer I must decide if the adjournment should continue or not. I believe it should and I do so because I find the argument put forward by HMRC to be persuasive. HMRC say that on receiving the notification from the Land Registry they objected to the applications and they issued Revenue determinations pursuant to Schedule 10 as mentioned above. It does seem to me to be correct that the determination having been made, (for example in the case of Mrs Neiland this was issued on 22 February 2011), the position is that HMRC are asserting the existence of notifiable transactions and that it is for the Applicants to refute this. This being so it must follow that while this state of affairs exists the effect of s. 79(1) Finance Act 2003 must be to prohibit any registration while the dispute about the question of whether or not SDLT  is payable continues.

12.	For all the reasons set out above and based upon the submissions considered above I find for the Respondent and therefore will leave the June direction as originally made save for one change. Accordingly I DIRECT that the proceedings before me are stayed until the final determination of either (1) the current appeals before the First Tier Tribunal involving the Dividend in specie Scheme and the application of s. 75A Finance Act 2003; or (2) the Applicants’ own appeal to the Tribunal, whichever is the earliest.  

13.	As to costs, I do not think it right that there be an order for costs at this time. It seems to me that there is a clear point at issue here that is open to interpretation and I therefore feel that the right course of action in regard to costs is to leave that matter in abeyance until there is an ultimate resolution of all of the four disputed transactions at which point costs can be decided when the complete picture can be seen. 

Dated this 16th day of December 2011
Corrected where underlined pursuant to rule 57 Adjudicator to H M Land Registry (Practice & Procedure) Rules 2003 this 23rd day of December 2011

By Order of The Adjudicator to HM Land Registry