Securing relief for overpaid SDLT "out of time"

Candy v HMRC [2025] UKFTT 416 (TC) is a further interesting decision regarding the availability of 'overpayment relief' in circumstances where there is another (primary) statutory mechanism for claiming such relief but the overpayment only arises after the time limit for the primary claim has expired. (Although non-binding as a decision of the First-tier Tribunal ("FTT"), Candy is the second decision of the FTT to reach this conclusion, after Smallman v HMRC [2018] UKFTT 680 (TC).)

The FTT's decision related to the interaction of two mechanisms under Finance Act 2003 ("FA 2003") for claiming repayments of Stamp Duty Land Tax (SDLT):

1. The specific rule in section 44(9) FA 2003 ("Section 44(9)") which provides that when SDLT is paid on the substantial performance of a contract that is afterwards not carried into effect, the tax is repayable by HMRC upon a claim made by amending the SDLT return.
2. The general SDLT overpayment relief claim under paragraph 34 of Schedule 10 FA 2003 ("Para 34").

The FTT held that a Para 34 claim was not excluded by the existence of Section 44(9) when the taxpayer was out of time to amend their SDLT return by the time the overpayment arose, clarifying that Para 34 is a back-stop mechanism for providing statutory relief when the taxpayer has had no other route to relief.

Facts

On 9 August 2012, Christian Candy ("CC") entered into two agreements with the Commissioners of the Royal Hospital Chelsea and the intermediate landlords for a property known as Gordon House in Chelsea, London. The first agreement was for a 25-year lease (the "Initial Lease") with a premium of £20 million. The second agreement was for a 201-year lease (the "Contracted-out Agreement for Lease") with a purchase price of £48 million, payable in four instalments.

SDLT became chargeable in 2012 on both the Initial Lease (which was completed) and the Contracted-out Agreement for Lease (which was not completed but was "substantially performed" when CC's building contractors began work at Gordon House).

On 1 April 2014, CC transferred his interests in Gordon House to his brother, Nicholas Candy ("NC") by (a) assigning the Initial Lease, and (b) novating the Contracted-out Agreement for Lease, to NC. The novation of the Contracted-out Agreement for Lease meant that it had not been "carried into effect" and, therefore, the SDLT paid on the basis of its substantial performance was in principle repayable under Section 44(9).

On 10 April 2014, CC made alternative claims under both Section 44(9) and Para 34 for repayment of the SDLT on the Contracted-out Agreement for Lease.

• HMRC did not dispute that Section 44(9) applied in principle, but refused the Section 44(9) claim as out of time due to the general time limit of 12 months for amending an SDLT return. This refusal was upheld by the Court of Appeal in Candy v HMRC [2022] EWCA Civ 144.
• The Para 34 claim was made within the time limit of 4 years, but HMRC refused it on the basis that the existence of the repayment mechanism in Section 44(9) excluded any other route to repayment.

Issue

The only issue before the FTT was whether relief is available under Para 34 in circumstances where the SDLT would have become repayable under Section 44(9), but relief under Section 44(9) was time-barred at the time the overpayment arose. (Had the overpayment arisen at a point when CC was in time to make a Section 44(9) claim, the specific exceptions in para 34A of Schedule 10 would have barred a Para 34 claim.)

The FTT considered three arguments put forward by HMRC as to why a Para 34 claim was not possible.

1. First, HMRC argued that Section 44(9) precluded a Para 34 claim as it provided that repayment "must" be claimed by amendment of the SDLT return.
2. Second, HMRC contended that allowing a claim under Para 34 would undermine the time limits established for amending returns that applied to a Section 44(9) claim. HMRC argued that strict procedural requirements and time limits are essential to the integrity of the self-assessment system.
3. Third, HMRC argued that no tax was overpaid by CC, as the SDLT had been chargeable at the time it was paid and HMRC would only have been required to repay the SDLT if a timely amendment to the land transaction return had been made under Section 44(9).

Decision

The FTT held that Para 34 provides a back-stop for relief when other statutory remedies are unavailable, so long as its threshold conditions and procedural requirements have been satisfied. The FTT noted specifically that this was consistent with the wording of the exclusion in Case C of Para 34A which expressly contemplates that Para 34 could (but for the exclusion) apply where relief could have been sought in another way in a period that has now expired.

Turning to the purpose of Para 34, the FTT referred to both the explanatory notes to the Finance (No.2) Bill 2010 which had introduced the relevant wording of Para 34, and the HMRC Technical Note used to consult on the wording of Para 34 (though the FTT noted it did not carry as much weight as the explanatory notes and only used it to "give colour" and "put the provision in context").

The Tribunal concluded that the purpose of Para 34 was to limit common law rights to recover overpaid tax which would otherwise be possible in the absence of a statutory mechanism. (It has previously been held that common law claims for the recovery of tax are excluded by a statutory scheme for claims, since such common law rights would be inconsistent with the purpose of the statutory scheme.) However, where all other statutory relief provisions had been exhausted, Para 34 provided a final statutory remedy as a last resort.

As to the argument that Para 34 applying would undermine the time limit applicable to Section 44(9), the Tribunal acknowledged the Court of Appeal's comments in CC's Section 44(9) appeal on the general importance of time limits in the self-assessment system, but the FTT concluded that Para 34 would not have applied if the Section 44(9) right to repayment had arisen before the expiry of the time limit for amending an SDLT return, and, when it did apply, Para 34 was subject to its own time limits and procedural requirements.

The FTT also rejected HMRC's argument that there was no overpayment unless HMRC were statutorily liable to repay upon a claim under the primary mechanism. The FTT agreed with the interpretation of Paras 34 and 34A in LLO Consulting v HMRC [2023] UKFTT 859 (TC) (the Upper Tribunal issued a decision on appeal in LLO ([2025] UKUT 127 (TCC)) four days after the FTT's decision in this case, but this interpretation was not challenged by HMRC in that appeal) and distinguished the other case relied on by HMRC (Ridgway v HMRC [2024] UKUT 36 (TCC)) as not relevant.

Conclusion

This decision clarifies the nature of Para 34 as an important safety net, providing a broad remedy for overpaid SDLT and a final statutory relief mechanism when all other statutory routes are time-barred. Importantly, this distinguishes Para 34 from common law remedies; whereas the latter exist separately from the statutory scheme of remedies (hence they can be inconsistent with the specific statutory remedies), the FTT viewed Para 34 as a consistent element of the same statutory scheme as the more specific statutory remedies.

More broadly, although Para 34 relates specifically to SDLT, similar overpayment relief rules exist in relation to other taxes, so the decision may be relevant to other types of overpayment relief claim. However, each statutory provision will have its own wording and purposes which may differ materially from the ones in this case.