In a recent Upper Tribunal (UT) decision — Investment and Securities Trust Limited v HMRC — the taxpayer achieved a partial success. The case concerned whether a company was entitled to relief from the Annual Tax on Enveloped Dwellings (ATED) and the higher rate Stamp Duty Land Tax (SDLT) when it held an option over a residential property intended for development and resale.
The First-tier Tribunal (FTT) had previously denied both reliefs. However, the UT took a different view in relation to ATED.
Background
The company acquired an option over a residential property. The reasons for doing so were threefold:
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To help address the director/shareholder’s urgent need for funds.
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To prevent the property being sold to another party.
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To allow time for development finance to be secured.
The Tribunal’s Findings
Higher Rate SDLT Relief
The UT agreed with the FTT that relief from higher-rate SDLT was not available.
The legislation requires the property interest to be acquired exclusively for the purpose of development and resale. Because the company also acquired the option for other reasons (e.g. addressing short-term financial needs and preventing a sale), this exclusivity test was not met.
ATED Relief
However, the UT found that the FTT had taken the wrong approach to ATED relief.
The key test for ATED relief is whether the property interest was held exclusively for the purpose of development and resale — not acquired exclusively for that purpose.
Once the option had been secured, the earlier reasons (raising funds and preventing a sale) had effectively fallen away. From that point forward, the interest was held solely for the company’s development trade. Therefore, ATED relief was allowed.
Outcome
| Relief Type |
Decision |
| Higher rate SDLT relief |
Not allowed |
| ATED relief |
Allowed |
What This Means
The judgment highlights an important distinction between:
This difference matters where property interests, such as options, are involved — particularly for developers and investors structuring the acquisition phase of projects.
If you’re working with development options, SPVs, or property-holding structures and want to understand how reliefs apply in practice, the team at A&C Chartered Accountants can help you navigate the rules with clarity.