Sajedi: taxpayers beware of the Tribunal's discretion

The case of A Sajedi and others v HMRC [2025] UKFTT 297 (TC) is an important reminder that matters of law are for the Tribunal to determine regardless of whether parties to a dispute are content to proceed on an (erroneous) understanding that the position in respect of a legal issue is settled or agreed. In this case, the Tribunal was mindful of the wider public interest in ensuring the correct tax was paid and dismissed the taxpayer’s appeal on the basis of an argument which HMRC had not advanced.

Background – the Commencement Issue

The Sajedi case involved consolidated appeals against closure notices issued by HMRC in respect of Stamp Duty Land Tax (SDLT). Specifically, the taxpayers had sought to claim back the higher rates of SDLT paid in respect of property purchases on the basis that they had replaced their main residence by disposing of a major interest in their old properties within a three-year period of the purchase. In fact, the taxpayers had not sold their old properties in the traditional manner but had entered into a declaration of trust which had the effect of transferring a 1% beneficial interest in the property.

HMRC’s argument was narrow: the legislation had been amended with effect from 22 November 2017 so that the higher rates would only be due back to the taxpayers if they did not retain a major interest in their old properties after the sale. HMRC argued that as the sales took place after 22 November 2017, the new legislation was in play and, as the taxpayers did retain a major interest in their old properties, they were not entitled to the reclaim. HMRC was keen to point out that the point of the legislative amendment was to close the loophole enabling taxpayers to transfer a small proportion of a previous home to circumvent the higher rates.

The taxpayer’s argument was that the new legislation only applied in respect of properties purchased on or after 22 November 2017 and, as their purchases preceded that date, it was not engaged, even though the sales took place later. The tribunal agreed.

If it had been left to HMRC and the taxpayers, that would have been the end of the matter, and the taxpayers would have won. However, somewhat unexpectedly (at least as far as the parties were concerned), the Tribunal took an interventionalist approach and considered an issue that neither party had raised nor – even following prompting from the Tribunal – engaged with; namely, whether the old properties had actually been ‘disposed’ of within the meaning of the SDLT legislation such that it was necessary to then consider when the properties were disposed of by the taxpayers.

The Tribunal’s decision

The Tribunal noted that the legislation (in its unamended form) still required the taxpayers to have “disposed of a major interest” in their old properties in order to be able to benefit from the basic residential rates of SDLT.

The Tribunal interpreted the term ‘disposed’ purposively and in accordance with the Ramsay line of cases (after W. T. Ramsay Ltd v Inland Revenue Commissioners [1982] AC 300). In particular, the Tribunal considered that the words must be taken to be concerned with transactions that had a real-world impact on the rights and obligations of the parties, and held that this necessarily excludes transactions which do not meaningfully change the character of the parties’ relationship to the property. Finding that the taxpayers had not established that they had disposed of a major interest in their old properties, the Tribunal dismissed the appeals. In our view, the Tribunal’s decision on this point is entirely unsurprising, the manner in which the taxpayers purportedly disposed of their interest in their old properties appeared artificial and contrived.

Judicial duty

The interesting thing about the Sajedi case is not so much the SDLT outcome, but the judicial process.

Despite the Tribunal's repeated warnings that the burden of establishing all the necessary legal requirements rested on the taxpayers, the taxpayers (and indeed, HMRC) proceeded on the narrow commencement issue and took it for granted that the old properties has been ‘disposed of’.

It was the Tribunal which stepped in – where HMRC had not – to consider the real world meaning and purpose of the legislation. The Tribunal was concerned that the parties were proceeding on an incorrect understanding of the relevant statutory words and rightly pointed out that it is not for the parties to agree matters of law between themselves. Remaining mindful of the wider public interest in ensuring the correct tax is paid, the Tribunal set out its view on the law – despite the lack of submissions from HMRC.

This follows other cases where the courts have taken an interventionalist approach – for example, BlueCrest Capital Management (UK) LLP v HMRC EWCA Civ 23. In BlueCrest, the Court of Appeal disagreed with the interpretation of the statute and adopted a narrow approach – finding HMRC’s published guidance, relied on by the appellant and accepted by HMRC, misunderstood the legislation. The court introduced a new argument at a late stage, which neither party had anticipated, and held that it was fair to do so.

These cases highlight that the judiciary is prepared to take an interventionist approach to ensure cases are decided on the basis of a correct interpretation of the law and serve as an important reminder that taxpayers need to ensure they meet all legal requirements and not just those disputed by HMRC. Careful preparation and thorough submissions are essential – taxpayers who think they might be ‘off the hook’ on a challenging element of their dispute simply because HMRC have seemingly overlooked an issue should be wary that the Tribunal may intervene in these circumstances and flex its discretion to consider all issues relevant to a dispute before it (and not just those the parties have prepared submissions in respect of).