In general, where a company acquires an interest in a dwelling for consideration over £500k, the company will be liable to pay Stamp Duty Land Tax (SDLT) at a flat rate of 17% (formerly 15%) in respect of the acquisition and, subsequently, while it holds that interest valued at over £500k, to the annual tax on enveloped dwellings (ATED). However, there are a number of reliefs from these SDLT and ATED charges, including property development trader relief which:

  1. in relation to SDLT, applies where the property is acquired exclusively for the purpose of development or redevelopment and resale in the course of a property development trade; and
  2. in relation to ATED, applies where the person entitled to the interest is carrying on a property development trade and the interest is held exclusively for the purpose of developing and reselling the land in the course of that trade.

Therefore, “where possible”, as noted in the Explanatory Note to the Finance Bill 2013 introducing ATED:

“the two reliefs should operate in tandem; so if the 15% of SDLT is paid on an acquisition then the property will be within ATED.”

It is, however, important, not to conflate the two. That is clear from this recent case of Investment and Securities Trust Ltd v HMRC [2025], in which the Upper Tribunal overturned, in part, the decision of the First-tier Tribunal, as explained below.

Investment and Securities Trust Ltd v HMRC: the details

Investment and Securities Trust (IST) was a company, owned and run by the Voice family, carrying on a trade of property development. In 2014, Ms Voice, a director of IST who indirectly held the majority of the ordinary shares in the company, lived in a dwelling in St John’s Wood (the Property) which was in a state of disrepair and needed refurbishment. She also had a pressing need for funds at the time and wished to sell the Property. Aware of this and the good development opportunity represented by the Property, her son, Mr Voice, who ran IST (as director) and had a minority (though not insubstantial) indirect shareholding in the company, decided that IST should acquire the Property. To this end, Ms Voice and Mr Voice drew up a business plan under which the following steps were implemented:

  • In consideration of the payment (in instalments) of £4,650,000, Ms Voice granted, in March 2014, an option to IST to acquire the freehold of the Property for a purchase price of £9.3m.
  • The price paid for the option would form part of the purchase price if the option was exercised.
  • The option was exercisable within a period of three months from a date five years after the date of the grant of the option and was freely assignable by IST.
  • IST exercised the option on 26 June 2019 and duly acquired the Property on 22 July 2019.

The tax dispute related to the SDLT treatment of the grant of the option and the ATED treatment of IST in relation to its holding of its interest under the option in the Property between the grant of the option and the acquisition by IST of the Property. HMRC assessed IST to SDLT at the higher flat 15% rate and ATED on the basis that property development trading relief applied neither for the purposes of SDLT nor for the purposes of ATED. IST appealed to the First-tier Tribunal which ruled in favour of HMRC on both counts on the basis that:

  • in relation to SDLT, in addition to serving the purpose of IST’s property development trade, the grant of the option served the purposes of addressing Ms Voice’s pressing need for funds, preventing the sale of the Property to a third party and providing IST with time to raise the funds to acquire and develop the Property, with the result that the acquisition of the option was not effected exclusively for the purpose of IST’s property development trade; and
  • in relation to ATED, as argued by HMRC (as inferred by the Upper Tribunal), the purpose of holding an interest is inextricably linked to and encompasses the purpose for its acquisition.

IST appealed to the Upper Tribunal. The Upper Tribunal upheld the decision of the First-tier Tribunal in relation to SDLT but reversed its decision as regards ATED. The Upper Tribunal distinguished between the relevant statutory question for SDLT (the purpose for which the interest is acquired), and the relevant statutory question for ATED (the purpose for which the interest is held).

In relation to SDLT, the Upper Tribunal agreed that addressing Ms Voice’s pressing need for funds, though not preventing the sale of the Property to a third party or providing IST with time to raise the funds to acquire and develop the Property, was a purpose of acquiring the option falling outside the ambit of IST’s property development trade. As a result, the acquisition by IST of the option could not be treated as exclusively for the purpose of its property development trade.

In relation to ATED, however, which related to IST’s interest in the Property following the acquisition of the option, the Upper Tribunal noted that, once IST had acquired the option, Ms Voice’s pressing need for funds had been addressed, and was therefore not a purpose for IST continuing to hold the option. As the only other purpose or purposes for which IST had acquired the option was IST’s property development trade, it clearly followed that the continued holding of the option by IST could not be treated as being for any other purpose, with the result that IST was not liable to ATED in respect of its interest in the Property under the option.

The takeaway

Much of the analysis in the Upper Tribunal’s decision in this case centred on the differences between the terms of the relief as drafted in the SDLT legislation on the one hand and the ATED legislation, on the other. The case illustrates the importance of not applying a “one size fits all” approach to legislative analysis generally. and, particularly as regards SDLT and ATED, ensuring that the terms of the reliefs from each are carefully analysed independently of each other. In addition, the wide construction by the Upper Tribunal of activity falling within the ambit of a property development trade is helpful for the taxpayer for the purposes of determining whether relief from the SDLT and/or ATED charge is available.

If you have questions or concerns about SDLT or ATED, please contact Michael Fluss.