New regulations will ‘force users of a wider range of SDLT avoidance schemes to disclose them’
A tax tribunal ruling against a ‘widely-marketed’ scheme, used by homebuyers and others to avoid stamp duty land tax, could save more than £170m for the exchequer subject to any appeal, according to HMRC.
The decision in Vardy Properties and Vardy Properties (Teeside) Limited v HMRC TC 2242, dated 6 September, is available on the Tribunals Judiciary website. The case relates to a series of transactions undertaken in 2006.
HMRC said a company in the Vardy group wanted to acquire property costing £7.25m, a direct purchase of which would have incurred SDLT of £290,000. ‘Instead, the group structured the purchase through a newly formed unlimited company, which immediately distributed the property as a dividend to the shareholder company. The group argued that SDLT rules looked through the unlimited company’s purchase; and since the final purchaser had paid nothing for the property it was not liable for any SDLT.’
HMRC added: ‘The First-tier Tribunal found that the unlimited company had not properly carried out company law requirements for declaring a dividend, and that in reality the ultimate owner of the property had indirectly provided the purchase price. For either reason, the avoidance scheme failed and the SDLT was due.’
The Chancellor said at Budget 2012: ‘Let me make this absolutely clear to people. If you buy a property in Britain that is used for residential purposes, then we will expect stamp duty to be paid. That is the clear intention of parliament.’
‘Breakthrough’
Today’s Financial Times reported that HMRC saw the victory against ‘misuse of “sub-sale” relief’ as a landmark case. The paper quoted Simon Yeo, a stamp duty specialist at KPMG, as saying that the decision was a breakthrough. It would not end all variations of the ‘sub-sale’ scheme, but should ‘make people think twice’ about such arrangements, particularly in the residential market. ‘It is clear now that HMRC can go to court and win,’ Yeo said.
HMRC’s Director General of Business Tax, Jim Harra, said: ‘This victory at the First-tier Tribunal sends a clear message to tax avoiders that we will challenge avoidance relentlessly. The decision is good news for the vast majority of taxpayers who pay, rather than try to dodge, their taxes. It shows that the courts will see through arrangements which are put in place just to avoid tax.’
Harra warned that people tempted to enter into avoidance schemes should ‘think twice and not be driven by greed into signing up for schemes that are just too good to be true’.
David Gauke, Exchequer Secretary to the Treasury, said: ‘This government has been clear that when someone buys a house in the UK they must pay stamp duty. At the Budget we announced a number of steps that we are taking to crack down on people who try to avoid this responsibility.’
DOTAS rules tightened
Regulations laid before parliament earlier this week would give HMRC access to more information about property tax avoidance, Gauke said. ‘They will not hesitate to use it to close down avoidance schemes.’
He added: ‘The government is totally committed to tackling this kind of tax avoidance scheme and HMRC will take cases through the courts whenever necessary.’
HMRC noted that some promoters were still marketing sub-sale avoidance schemes. A consultation on ‘broad options’ to address avoidance using the sub-sale rules closes on 9 October.
'Responsible tax planning'
Marc Selby, a partner at Laytons, noted in May that ‘if the future for promoters of abusive SDLT schemes looks bleak there will be ample opportunities for the specialist to assist and advise on (to use the phase adopted in the Aaronson report) responsible tax planning’.
Such work would involve ‘very different challenges to those advising on abusive schemes’, he said, writing in Tax Journal.
New regulations will ‘force users of a wider range of SDLT avoidance schemes to disclose them’
A tax tribunal ruling against a ‘widely-marketed’ scheme, used by homebuyers and others to avoid stamp duty land tax, could save more than £170m for the exchequer subject to any appeal, according to HMRC.
The decision in Vardy Properties and Vardy Properties (Teeside) Limited v HMRC TC 2242, dated 6 September, is available on the Tribunals Judiciary website. The case relates to a series of transactions undertaken in 2006.
HMRC said a company in the Vardy group wanted to acquire property costing £7.25m, a direct purchase of which would have incurred SDLT of £290,000. ‘Instead, the group structured the purchase through a newly formed unlimited company, which immediately distributed the property as a dividend to the shareholder company. The group argued that SDLT rules looked through the unlimited company’s purchase; and since the final purchaser had paid nothing for the property it was not liable for any SDLT.’
HMRC added: ‘The First-tier Tribunal found that the unlimited company had not properly carried out company law requirements for declaring a dividend, and that in reality the ultimate owner of the property had indirectly provided the purchase price. For either reason, the avoidance scheme failed and the SDLT was due.’
The Chancellor said at Budget 2012: ‘Let me make this absolutely clear to people. If you buy a property in Britain that is used for residential purposes, then we will expect stamp duty to be paid. That is the clear intention of parliament.’
‘Breakthrough’
Today’s Financial Times reported that HMRC saw the victory against ‘misuse of “sub-sale” relief’ as a landmark case. The paper quoted Simon Yeo, a stamp duty specialist at KPMG, as saying that the decision was a breakthrough. It would not end all variations of the ‘sub-sale’ scheme, but should ‘make people think twice’ about such arrangements, particularly in the residential market. ‘It is clear now that HMRC can go to court and win,’ Yeo said.
HMRC’s Director General of Business Tax, Jim Harra, said: ‘This victory at the First-tier Tribunal sends a clear message to tax avoiders that we will challenge avoidance relentlessly. The decision is good news for the vast majority of taxpayers who pay, rather than try to dodge, their taxes. It shows that the courts will see through arrangements which are put in place just to avoid tax.’
Harra warned that people tempted to enter into avoidance schemes should ‘think twice and not be driven by greed into signing up for schemes that are just too good to be true’.
David Gauke, Exchequer Secretary to the Treasury, said: ‘This government has been clear that when someone buys a house in the UK they must pay stamp duty. At the Budget we announced a number of steps that we are taking to crack down on people who try to avoid this responsibility.’
DOTAS rules tightened
Regulations laid before parliament earlier this week would give HMRC access to more information about property tax avoidance, Gauke said. ‘They will not hesitate to use it to close down avoidance schemes.’
He added: ‘The government is totally committed to tackling this kind of tax avoidance scheme and HMRC will take cases through the courts whenever necessary.’
HMRC noted that some promoters were still marketing sub-sale avoidance schemes. A consultation on ‘broad options’ to address avoidance using the sub-sale rules closes on 9 October.
'Responsible tax planning'
Marc Selby, a partner at Laytons, noted in May that ‘if the future for promoters of abusive SDLT schemes looks bleak there will be ample opportunities for the specialist to assist and advise on (to use the phase adopted in the Aaronson report) responsible tax planning’.
Such work would involve ‘very different challenges to those advising on abusive schemes’, he said, writing in Tax Journal.
