Lease of premises — Premium — Calculation — Stamp duty — Inland Revenue holding lease assessable to duty in accordance with Schedule 1 to Stamp Act 1891 — Appeal to High Court dismissed
On August 14 1993 the authorities of St John’s College, Cambridge, granted two leases respectively of premises at the Warehouse, Bridge Street, Cambridge, and 4 Richmond Terrace, Thompson’s Lane, Cambridge, for terms of 99 years from June 24 1993. Clause 3 of each lease provided for the payment of a premium by the tenant to the landlord, the clause in the first lease providing for calculation in accordance with the following formula “a x b where `a’ is four thousand one hundred and seventy nine (4,179) and `b’ is the price at close of business on the twenty fifth business day following the execution of this lease of 13 3/4% Treasury Loan Stock 1993…”.
The second lease was in the same terms save that the figure of 833 was substituted for 4,179. The formula was admittedly devised with a view to minimising stamp duty. The Inland Revenue took the view that the leases were chargeable with ad valorem stamp duty in respect of the premiums in accordance with Schedule 1 to the Stamp Act 1891. For that purpose they took the closing price of the stock on Friday August 13 1993 as the prevailing date of execution of the lease (August 14 being a Saturday). The taxpayer appealed contending that the leases were chargeable only with a fixed duty of £2 on the basis that the consideration was not capable of being ascertained at the date of the execution of the lease.
Held The appeal was dismissed.
1. Stamp duty was charged by reference to the circumstances which existed at the time the instrument was executed. Ad valorem stamp duty might not be levied on an instrument by reference to consideration, the amount of which was unascertainable at the time when the instrument was executed.
2. In this case the consideration was not ascertainable at the time the instrument was executed since it was carefully designed not to be.
3. However, it had to be possible to ascertain from the agreement that there was some specified sum agreed upon as the basic payment.
4. The issue in the present case depended upon whether the formula adopted by clause 3 could be issued to establish a basic payment as at the date of the execution of the instrument based on the then closing price of treasury stock, any subsequent variation in that price in the 25 days up to the date specified in clause 3 itself being treated as a “contingency” to be disregarded.
5. Although the formula used by the agreement could not in terms be applied as at the date of the instrument since it referred to a date 25 days thereafter, none the less it was possible to ascertain the price of the relevant treasury stock as at that date.
6. Once one got over the conceptual difficulty of applying the contractual formula at a different point in time from that envisaged by the contract, there was no practical difficulty in fixing the amount. The appropriate price was that which could be fairly regarded as the “closing price” as at the date of the instrument, that was the one most recently available.
7. Accordingly, the two leases in question were chargeable with duty assessed in accordance with the formula specified in clause 3 of each lease, applying the closing price of the treasury stock as at August 13 1993 (ie £102.125).
Roger Thomas (instructed by Taylor Vintners) appeared for the taxpayer; Michael Furness (instructed by the solicitor to the Inland Revenue) appeared for the Crown.
