On appeal from: [2016] EWCA Civ 485.

This appeal considered whether the respondent Project Blue Ltd was the ‘vendor’ in the Finance Act 2003, s 71A(2), and therefore whethere stamp duty land tax should imposed given the “sub-sale relief” provision in s 45(3). In 2007 Project Blue purchased the former Chelsea Barracks in London from the Ministry of Defence. In order make the purchase, it obtained finance from a Qatari Bank, Masraf al Rayan (“MAR”), which specialises in Islamic finance (Ijara).

Project Blue contracted to sub-sell the freehold to MAR. MAR agreed to lease the barracks back.

The Supreme Court allowed HMRC’s appeal. It held that the UT correctly concluded that Project Blue was the “vendor” under s 71A(2). Therefore, but for s 75A of the 2003 Act, the combination of the operation of sub-sale relief under s 45(2) and (3) and the exemption under s 71A(2) relieved the sale by the MoD to PBL and exempted the sale by PBL to MAR from a charge to SDLT. S 75A was enacted by Parliament to close such lacunas.

Various reasons support this finding. For instance, there was nothing in s 71A that suggests that the exemption in s 71A(2) would not apply when the sale by the customer to the financial institution is a sub-sale which takes place contemporaneously and in connection with the customer’s purchase of the major interest in land. The interpretation is consistent with the aim of s 71A, which the UT identified, of seeking to equate Ijara financing with conventional lending in the UK by taxing the purchaser of the property and exempting the financier.

For judgment, please download: [2018] UKSC 30
For Court’s Press Summary, please download: Court’s Press Summary
For a non-PDF version of the judgment, please visit: BAILII

To watch the hearing, please visit: Supreme Court Website (28 Feb 2018 morning session) (28 Feb 2018 afternoon session) (1 Mar 2018 morning session) (1 Mar 2018 afternoon session)