The FT has noted a potential significant saving on the purchase of a mansion bought alongside five other properties which may have reduced the SDLT from a top residential rate of 17% (for UK tax resident taxpayers) to a top rate of 5% for commercial property purchases.
Section 116(7), Finance Act 2003: Where six or more separate dwellings are the subject of a single transaction, they must be treated as non-residential property if Multiple Dwellings Relief (relief abolished with effect from 1 June 2024) is not claimed.
The original draftsman of the legislation may well have been thinking of the farm house accompanied by tenanted cottages used by the farmworkers, or a property developer buying a number of units with a view to redeveloping and selling or leasing the newly developed housing stock.
In my view there is an argument for retaining the relief but introducing a business purpose test.
Suneil Setiya, co-founder of trading firm Quadrature Capital, bought a £275mn mansion in Chelsea from property tycoon Nick Candy and his former wife, the FT reported in April.
Over the summer the Court of Appeal gave judgment on an appeal brought by the City of London, relating to a rates mitigation scheme. The decision will be of keen interest to any landlords trying to manage their liability for non-domestic rates, or business rates. The court found that a common existing scheme is not effective. The ruling aligns the court with the much stricter approach we are seeing tax authorities are taking. The case itself was The Mayor and Commonalty and Citizens of the City of London v 48th Street Holdings Ltd & Another [2026] EWCA Civ 970 (KB).
It goes without saying that any landlords who use these or similar schemes should speak to their legal advisors.
The scheme
The scheme in question is a common one:
A landlord has empty premises, and has used up the period of relief from paying business rates.
A third party rates mitigation business (the “tenant”) takes a lease of empty premises from the landlord.
The tenant moves some materials (in this case boxes) into the premises and occupies (via the boxes) for long enough that the landlord will be able to claim empty rates relief.
The tenant accepts liability for business rates during its period of occupation. As between the landlord and the tenant, the landlord invariably makes a payment to the tenant at least equal to the business rates payment.
When the tenant later vacates, the landlord is able to claim rates relief, and the tenant takes a success fee.
These schemes have been controversial for many years, with local authorities challenging them with varying degrees of success. However the High Court has previously found a similar scheme to be effective at resetting the landlord’s entitlement to business rates relief.
The ruling
In this case, the Court of Appeal overturned the previous ruling by the High Court that had upheld these types of schemes. It is relevant to this case that it was common ground that the occupation was only for the benefit of rates mitigation; it was relevant that there was nothing in the boxes that the tenant needed to store. The Court said if the only benefit for the tenant was to achieve rating relief, that did not count as occupation and would fall foul of other case law whereby the Court will not uphold a structure that has been created purely to reduce a party’s tax liability. That would run contrary to the intention of the legislation.
What now?
Landlords will want to assess any existing arrangements in light of the judgment.
As things stand, use of schemes such as the one considered by the Court will not allow a landlord to benefit from repeat empty rates relief. Given the ruling could constitute an existential threat to the rates mitigation business involved, a further appeal to the Supreme Court may be in the works. Watch this space.
Landlords who are looking to mitigate rates liability will still have other avenues open to them, such as lettings to pop-ups or other occupiers. Equally, given the emphasis placed on ‘what was in the boxes’, it may be that the case might have been decided differently if the boxes had contained something that needed to be stored – for example, archive material.
"something done for no purpose other
than the avoidance of liability for rates will be ineffective in achieving that purpose" - Lady Justice Falk
HMRC confirms PGMOL referees are self-employed for tax purposes
HMRC has decided it will not appeal the most recent decision in the PGMOL case, bringing the dispute to a close.
PGMOL organises the refereeing of football matches across the English leagues. Outside the top tier most referees are not full time employees, but part time workers who often referee as a second job or hobby.
These referees are only paid for matches they actually officiate and can pick and choose whether to volunteer to referee matches (and can be refused by PGMOL).
HMRC thought they had caught PGMOL offside contending that referees were employees for employment tax purposes, and so payments were subject to PAYE. PGMOL disagreed, arguing that the referees were self employed. HMRC’s interpretation would have seen over half a million of tax and national insurance contributions due.
The employment status test
The case turned heavily on the core tenets of employment status factors for tax purposes, being control and mutuality of obligation.
Mutuality of obligation is the concept both parties having the obligation to provide and accept/perform work. Employers must provide employees with work (or pay them regardless) and employees must accept work given if it’s within the remit of their employment contract. Whereas for a contractor, the client has no obligation to offer work and only does so if and when it needs a task done, and the contractor has no obligation to accept work and is free to reject work offered.
Control is another key factor, whilst an employee is instructed what to do and how – being allocated tasks by a manager, a contractor is given a project and within that determines how best to approach the task. A contractor can make a profit by working more quickly.
A match played across the courts
HMRC and PGMOL clashed at the First-tier tribunal, with PGMOL coming out victorious. The Upper Tribunal, although disagreeing slightly with the FTT’s decision relating to control, ultimately dismissed HMRC’s decision. HMRC pulled one back as this was reversed at the Court of Appeal which held that the FTT had erred in law relating to mutuality of obligation and control and remitted the matter back to the FTT to reconsider. PMGOL launcher a quick counter by appealing to the Supreme Court which upheld the Court of Appeal’s decision but remitted the matter to the FTT on a revised basis, directing the FTT to focus their decision around the multifactorial approach as taken in “Read Mixed Concrete” and whether the individual engagements for each match were contracts of employment given that mutuality and control had already been found to be present.
The FTT’s final verdict
There are generally three stages for considering whether there is an employment contract
Consider if there is personal service and mutuality of obligations
Consider if there is sufficient control over the worker by the employer/client
Unless stage 1 or 2 definitively determines there is no employment contract, look at the relationship in a wider, more holistic way, both in the other terms of the contract but also factors outside the contract itself
The Supreme Court had determined that there was some element of mutuality of obligation, as once referees had signed up for a match, they must deliver a personal service of refereeing (unless they were to cancel). Equally, PGMOL had control over referees, in part due to its ability to sanction referees post game.
The FTT stated that “The issue for Stage Three is whether the control identified by the Supreme Court is of a kind and degree which places the referee in a position of subordination characteristic of employment.”
Looking at the specific factors around how PGMOL operated the FTT held that whilst PGMOL had control “its nature and quality were regulatory, facilitative and developmental rather than managerial and supervisory” accordingly stage 3 of the test pointed away from a contract of employment. Similarly, when it came to mutuality of obligation, whilst there was the “irreducible minimum of mutuality” this was not sufficient for an employment contract.
Full-time whistle for HMRC
HMRC have confirmed they will not appeal the decision, meaning that PGMOL’s determination of referees as not being employees was correct. HMRC has stated that the case has “clarified how to distinguish employees and self-employed workers for tax purposes and confirmed our longstanding approach”.
The decision is a useful reminder that employment status remains a highly fact-sensitive exercise. While mutuality of obligation and control remain important considerations, tribunals will continue to assess the overall relationship when determining whether an engagement amounts to employment for tax purposes.
While HMRC may have called time on the PGMOL case, employment status remains one of the most closely scrutinised areas of employment tax. If you would like to discuss the tax treatment of your workforce or review your employment status processes, please contact a member of our Tax team.
HMRC has issued new guidance this week confirming its position on chattels claims in relation to Stamp Duty Land Tax (SDLT) liability.
Buyers often want to reduce their SDLT liability on a property purchase by arguing that some of the purchase price relates to chattels, i.e. tangible, moveable assets that are not permanently attached to the property such as furniture, paintings, rugs and curtains.
However, HMRC is alive to this increasing trend, updating its guidance to confirm that any allocation to chattels will have to be properly documented in the sale contract.
This will not be a simple exercise as sellers will need to consider the Capital Gains Tax (CGT) implications of selling valuable chattels as the gain on those assets will not be protected by principal private residence (PPR). As a result, conveyancers will want to carve out of their engagement advice relating to CGT.
In the majority of cases consideration for the transaction will be correctly attributed to the land transaction, with no apportionment for chattels being appropriate. However, where a purchaser agrees to buy a property for a price that includes an amount properly attributed to chattels, that amount will not be subject to SDLT, as long as the purchaser can provide contemporaneous evidence from the conveyancing process that the attribution is genuine and arises from a separate negotiation for those chattels, for example by being expressly identified and priced in the sale contract. Simply showing that there were some chattels in the property when it was sold would not be considered sufficient evidence.
The FT’s report that Rachel Reeves has instructed the UK Treasury to examine the tax rules that can result in double taxation (see Anson article) for UK resident members of US LLCs is welcome. We look forward to the promised consultation.
On the wider picture of making UK plc attractive to wealthy individuals and families, who are internationally mobile nowadays, we can hope that this welcome signal prompts:
The UK Treasury to revisit the UK’s inheritance tax regime as well. For example, for those US citizens that Rachel Reeves wants to attract to the UK, the difference between the tax-free allowance for individuals in the US (a $15m lifetime exemption that increases annually for inflation) and the UK (£325,000) is material, even if planning (see FLP article) can bridge the gap.
The UK Government to streamline the visa rules (see more about immigration options) for wealthy individuals and families who can invest in the UK, as well as entrepreneurs and talented individuals who help drive growth.
She will promise that the Treasury will revisit tax rules which currently mean that people who receive income from a US limited liability company and move to the UK can face being taxed on both sides of the Atlantic. A consultation on the rules will be launched in due course.
