SDLT relief for special tax sites

The Chartered Institute of Taxation (CIOT) and Stamp Taxes Practitioners Group (STPG) respond to a HMRC letter (reproduced below) on SDLT relief for special tax sites.

HMRCs letter:

I am writing in relation to a question you raised at the last Working Together Stakeholder Group (WTSG) about the application of SDLT freeport relief to developers who intend to enter into a forward funding structure.

You asked whether the carve out in paragraph 3(2)(d) of Schedule 6C of FA 2003 would apply to a developer who buys land which is then built out under a forward funding arrangement. The scenario you provided was where a developer buys land in a freeport tax site, promotes planning applications, secures a tenant, enters into an agreement for lease with the tenant and then sells the land to a funder, with the funder then entering into a development agreement with the developer for the development of the building.

It would appear that in this scenario, the land is being held as stock of the developer without any development taking place before the land is sold to a funder. Our position is that promoting planning applications and entering into a lease agreement with a tenant does not amount to development. This is supported by recent Tribunal decisions in cases involving multiple dwellings relief (e.g. Ladson Preston Ltd and AKA Developments Greenview Ltd v HMRC). Therefore, our view is that the relief conditions in Schedule 6C of FA 2003 would not be met.

Schedule 6C of FA 2003 contains provisions to prevent land banking. The activity carried out by the developer in your example would appear to be quite similar to that which might be carried out by a developer intending to buy land as an investment and holding it for future use without plans to develop it. We do not see a practical way to distinguish between these two scenarios and do not agree that a developer could claim SDLT freeports relief in the circumstances you describe.