In a recent Upper Tribunal (UT) case, Investment and Securities Trust Limited v HMRC, the UT found that a company was entitled to Annual Tax on Enveloped Dwellings (ATED) relief as it held an option over a property exclusively for the purpose of developing and reselling that property, in the course of its property development trade.

The First Tier Tribunal (FTT) had previously ruled that neither ATED relief nor higher rate Stamp Duty Land Tax (SDLT) relief were available in respect of the property option.

The company had acquired the option for 3 purposes:

• 1. Addressing the director/shareholder’s pressing need for funds.
  2. Preventing a sale to a third party.
  3. Allowing time to raise development funds.

The UT agreed with the FTT that relief from the higher rates of SDLT was not available because the legislation requires the chargeable interest to be acquired exclusively for development or redevelopment of land and resale. This test was not met.

The UT found that the FTT had misinterpreted the statutory test for ATED relief, however. The test was whether the interest was held exclusively for development and resale. It followed that once the company had acquired the option, purposes 1 and 2 had been met and the sole reason for the company holding the option was to develop it.

For these reasons, the UT allowed the ATED relief appeal but dismissed the higher rate SDLT relief appeal.