The owner of a property in Essex has lost an appeal over a demand for £70,500 in higher rate stamp duty, claiming HMRC did not consider the ‘human element’.

The dispute related to an HMRC closure notice for a demand for £70,500 in higher rate stamp duty land tax (SDLT) related to the acquisition of a residential property in Hornchurch.

The First Tier Tribunal has ruled that the appellant Mayfair Avenue Limited, represented by sole director Yasir Ali at the hearing, was a non-qualifying individual occupying the property and was liable for higher rate SDLT.

The property in question had been Yasir Ali’s family home for over a decade and he was the sole director of Mayfair Avenue Limited, a company which he set up in April 2021 as a vehicle to purchase the property when his buyer dropped out of a chain.

This came about because Ali had put the house on the market earlier in the year and had secured a purchaser who later fell through.

Rather than lose the new home the family planned to buy, Ali decided to transfer the property into a limited company following advice from his mortgage broker.

This was duly done and Mayfair Avenue Ltd was created on 21 April 2021 with Ali as sole director.

On 30 June 2021, the company acquired the Mayfair Avenue property from Ali for £650,000. The SDLT return was submitted on the same day and £27,000 of SDLT was paid.

Ali and his family remained in the house while work was completed on his new property and they moved in on 13 May 2022.

On 2 March 2022, HMRC opened a compliance check into the SDLT return, and a closure notice was issued on 25 May under Schedule 4A to Finance Act 2003 (FA 2003). Ali disputed the charge and appealed to the tribunal.

At the tribunal, Ali represented himself and argued that the law was “deficient because it does not contain a grace period or an opportunity to find out that the amount of SDLT is so high”.

He added that “he didn’t know that it applied, or he never would have stayed in the property”, stressing that he had paid rent to Mayfair Avenue Ltd for the period the family stayed in the house.

Ali also said that HMRC unfairly failed to “consider the human element”, and that”tax should not be there to catch people out”.

HMRC’s lawyer Kate Birtles rejected his arguments, stating that the notice of enquiry was validly issued as it was within the nine-month limit and that the 15% higher rate of SDLT for certain transactions set out by paragraph 3, Schedule 10 of FA 2003 applied.

This was because the transaction consisted entirely of a chargeable interest in a single dwelling, the value was in excess of £500,000 (being £650,000), and was a high-value residential transaction purchased by a company.

Ali was the sole director and shareholder of the appellant company and as such, had control of Mayfair Avenue Limited. He was therefore a connected person and a non-qualifying individual for the purposes of paragraph 5 Schedule 4A of FA 2003.

Finding in favour of HMRC, Tribunal Judge McGregor said: “This means that the 15% rate of SDLT applied to the transaction. We find that HMRC has correctly calculated the SDLT due on the transaction, giving rise to a closure notice for additional SDLT of £70,500.

“Mr Ali asked us to consider the question from a number of different angles. Unfortunately, any deficiency in the legislation by not providing a grace period is not within the remit of this tribunal. Only parliament can change the law.”

Tribunal Judge McGregor and Simon Bird also considered the issue of the “fairness” of the levy, but said that none of the tribunal’s powers “provide discretionary relief or mitigation on the grounds of fairness. We therefore find that the statutory powers do not enable us to consider fairness”.

The appeal was dismissed.