Property Tax July Newsletter

Since our last update, we have been busy connecting with local solicitors and accountancy firms, advising clients, and supporting the wider teams on property tax matters. Please find below some highlights and reminders on key issues to consider with clients selling garden land with planning permission. 

Stowmarket FC Fundraiser 

As shown in Monday’s post, Tom Butterworth is fundraising for Stowmarket Town Football Club. Find out more on how you can support the club here. 

Recent Property Tax Team Successes 

HMRC Disclosure & Penalty Suspension

Over recent months, we have assisted a high-net-worth banker client with a Worldwide Disclosure, which has now concluded successfully. Our detailed submission to HMRC mitigated penalties and reduced the period of disclosure, resulting in a tax and interest saving of £60,000. We also secured the suspension of penalties, delivering a further potential saving of £7,000. 

High-Profile Advisory Engagement

Following a positive resolution of an HMRC enquiry last year, a prominent American author has re-engaged us for bespoke tax advisory work valued at £2,350. The client has also appointed Affinia for ongoing accounting and corporation tax compliance, with expected annual fees of £5,700. 

Large Group Engagement

We have recently received instructions from Limestone Capital, a large US private equity fund that focuses on investment in Hospitality, Leisure and Fitness businesses across the Americas and Europe. 

We are assisting with a significant value-add tax advisory project to support their first entry into the UK market, relating to their acquisition of the corporate owner of the Nobu Hotel in Shoreditch, London, for £80 million. 

They plan to relaunch Nobu under their own PE-backed brand, grow the business, and no doubt begin exit planning in due course. 

There are proposals for a further five acquisitions, which could open up the opportunity to tender for £1m of fees across due diligence, tax work and transactional advice, providing involvement for all of our service lines. 

In addition, there is an opportunity to secure the audit of their five groups, which would represent potential fee revenue of £0.5m per year across our service lines. 

As part of this new relationship, Limestone have also introduced us to one of their investments, YDUN SARL. Limestone have backed YDUN, a tech-driven fitness business, with an initial investment of £4m in the first funding round. 

Limestone is supporting YDUN in breaking into the UK market, and we have been instructed to provide compliance and advisory services for their UK-based operations. This includes significant audit fee revenue and future opportunities to support this exciting new client as they grow safely and rapidly in the UK marketplace. 

This is a business with global ambitions and strong growth potential. 

We are very excited to be supporting these clients across all of our service lines. 

FHL Regime Abolished: Ownership Structures May Need Review 

As you’ll know, the Furnished Holiday Lettings (FHL) regime was abolished from 6 April 2025. Clients with former FHL properties will now be subject to standard residential letting rules. 

Some points to consider: 

• Income splitting between spouses
  • Where FHL income was previously shared in unequal proportions, income will now default to a 50:50 split unless a declaration of trust and Form 17 are submitted to HMRC.  
• SDLT implications
  • Transferring property interests between spouses to reflect beneficial ownership may trigger SDLT if the property is mortgaged, even without cash changing hands. Please bear this in mind when advising clients. 

If you have clients still owning former FHLs, we would be happy to assist in reviewing their ownership structures and ensuring the right steps are taken. 

Coming soon: The Property Tax Team Roadshow   

We are in the process of planning a Property Tax roadshow where we will visit each office to provide an overview of the areas in which we can assist. 

More details and dates to follow… watch this space! 

Recent Client Queries: PRR, Garden Disposals and Development Risk 

We have seen a growing number of queries involving clients securing planning permission on part of their garden and disposing of the land. 

While these often appear to be straightforward capital disposals, they raise several tax risks: 

• Private Residence Relief (PRR)
  • Land must still qualify as part of the garden or grounds at the time of disposal. Fencing, separate access, or planning permission may indicate that the land is no longer being used for this purpose, blocking a PRR claim! 
• Permitted area limits
  • PRR generally applies automatically to land up to 0.5 hectares. Anything larger must be justified as necessary for the enjoyment of the property. 
• Transactions in land anti avoidance
  • • These rules may apply where one main purpose of acquiring land is to realise a profit, or if land is developed primarily to generate profit on disposal.
    • Planning permission alone may not trigger these rules, but caution is essential as HMRC increasingly challenges these transactions, often taxing profits at income tax rates.
    • The rules also apply to ‘slice of the action’ contracts where the former landowner receives a share of future development profits. 

This area is attracting growing HMRC attention. If you encounter clients in similar situations, please contact us for advice on PRR eligibility, structuring, and any anti-avoidance concerns. 

SDLT case: Bemal Patel v HMRC  

A recent First-tier Tribunal case is a useful reminder of how a property can be considered as ‘residential’ for SDLT purposes, when a property is mid-development. 

Mr Patel bought a part-complete project to convert two flats into a single five-bedroom home. Although work had already started and planning permission was in place, a condition restricted occupation until a separate nearby development was finished. An SDLT return was filed on the basis that the property was residential, and Multiple Dwellings Relief (MDR) was claimed. His agent later argued that the property should have been treated as non-residential, due to its unfinished state and the planning restriction, and sought a refund. 

HMRC opened an enquiry into the overpayment relief claim, denied it, and issued a closure notice on the basis that Mr Patel’s original assessment of the property as residential was correct and that MDR should not have applied to the purchase. Both parties engaged in Alternative Dispute Resolution but were unable to reach an agreement. Mr Patel then appealed to the First-tier Tribunal. 

The Tribunal disagreed with Mr Patel’s agent and found that the property was clearly in the process of being adapted into a dwelling, and that a planning condition affecting occupation didn’t change the property’s essential characteristics and intended use at the effective date of acquisition.  

We are on hand to support with any property tax matters and can be contacted via propertytax@affinia.co.uk