Stamp Duty – Lease or tack – Consideration for lease including premium – Premium to be calculated in accordance with formula requiring calculation at future date – Commissioners deciding leases chargeable with ad valorem duty in respect of premiums under Stamp Act 1891, Schedule 1 – Judge finding contingency principle applied – Appeal dismissed
On Saturday August 14 1993 St John’s College, Cambridge, granted to LM Tenancies 1 plc, the appellant, leases of two premises, the Warehouse, Bridge Street and 4 Richmond Terrace, Thompson’s Lane, Cambridge, for terms of 99 years from June 24 1993. The consideration in each lease was an annual rent and a premium, each of which was ascertainable in accordance with a formula. Each lease provided, in clause 3, for the calculation of the premium in accordance with a formula one element of which was to be ascertained by reference to a future event. The figures included in clause 3 of each lease were based on “target values” agreed by landlord and tenant in advance as representing the appropriate market premium. It was common ground that no duty was payable in respect of the annual rent, but the commissioners took the view that the leases were chargeable with ad valorem duty in respect of the premiums in accordance with Schedule 1 to the Stamp Act 1891. The relevant provision was that dealing with “Lease or Tack”. Para (3) referred to a lease for a definite term “where the consideration . . . moving . . . to the lessor . . . consists of any money”. The Commissioners sought to ascertain the consideration moving to the lessor by applying the formula to the closing price of the stock on Friday, August 13, (August 14 being a Saturday) as being that prevailing on the date of the execution of the lease, rather than, as expressly required by the formula, to the value of the stock on the day 25 working days after the execution of the leases.
The commissioners relied on the contingency principle (see per Viscount Radcliffe in Independent Television Authority v Inland Revenue Commissioners [1961] AC 427, at p443) and stated, inter alia, ” that ” the relevant charge on the amount of the consideration “applies to any amount which is ascertainable from the terms of the lease and the circumstances in existence at the date of its execution without having regard to any contingencies to which the payment of that consideration or its amount may be subject”. The appellant was dissatisfied and requested a case to be stated. The judge upheld the assessments [1996] 2 EGLR 119 and the appellant appealed, contending that the commissioners had not identified an ascertained and specified sum which, on a proper construction of the agreement, the parties had agreed to pay, even if only in a contingency or disregarding a contingency.
Held: The appeal was dismissed.
1. The words in section 55 of the Finance Act 1963 “the amount or value of the consideration [payable] for the sale” included the amount or value payable in the future and amounts or value payable immediately or in the future whether unconditionally or contingently.
2. The court was bound to apply the principles established by Underground Electric Railways Co of London v Inland Revunue Commissioners [1906] AC 21 which showed that: (a) the minimum or specified sum might be ascertained by reference to an extrenal factor; and (b) that the sum might be determined as at the date of the agreement even though the contract required the determination to be made, not at that date, but at the later dates when profits from year to year came to be ascertained. The appellants had not challenged (a), but their submission that the judge had been wrong to apply (b) to the facts of the instant case was not accepted.
Christopher McCall QC and Roger Thomas (instructed by Taylor Vintners, of Cambridge) appeared for the appellants; Launcelot Henderson QC and Michael Furness (instructed by the solicitor to the Inland Revenue) appeared for the respondents.
