HMRC has published a new GAAR Advisory Panel opinion on stamp duty land tax arrangements in relation to the sale and purchase of a residential property involving an alternative finance agreement and a lease agreement.
The taxpayers (a married couple) purchased a residential property for just under £1m. They took advice on a scheme which, the promoter contended, would save them SDLT on the purchase.
The scheme used a series of steps involving trusts settling an amount equal to the purchase price, and the acquisition of the property by the taxpayers under an alternative finance agreement where the property was acquired ‘absolutely for the lender’ rather than directly by the taxpayers. At that point any acquisition by the lender was treated as an exempt ‘security interest’ rather than a land transaction, with no SDLT due. The property was then leased to the taxpayers at a peppercorn rent.
The intended effect was to replace the £1m consideration with the peppercorn amount, meaning that no SDLT would be due on the transaction.
The Panel found that the enablers had ‘devised and implemented a contrived way of circumventing the clear aim of the tax legislation’ and that the arrangements were not a reasonable course of action.
This was the Panel’s first opinion under the provisions of F(No 2)A 2017 Sch 16 which introduced new penalties for enablers of defeated tax avoidance schemes.
HMRC has published a new GAAR Advisory Panel opinion on stamp duty land tax arrangements in relation to the sale and purchase of a residential property involving an alternative finance agreement and a lease agreement.
The taxpayers (a married couple) purchased a residential property for just under £1m. They took advice on a scheme which, the promoter contended, would save them SDLT on the purchase.
The scheme used a series of steps involving trusts settling an amount equal to the purchase price, and the acquisition of the property by the taxpayers under an alternative finance agreement where the property was acquired ‘absolutely for the lender’ rather than directly by the taxpayers. At that point any acquisition by the lender was treated as an exempt ‘security interest’ rather than a land transaction, with no SDLT due. The property was then leased to the taxpayers at a peppercorn rent.
The intended effect was to replace the £1m consideration with the peppercorn amount, meaning that no SDLT would be due on the transaction.
The Panel found that the enablers had ‘devised and implemented a contrived way of circumventing the clear aim of the tax legislation’ and that the arrangements were not a reasonable course of action.
This was the Panel’s first opinion under the provisions of F(No 2)A 2017 Sch 16 which introduced new penalties for enablers of defeated tax avoidance schemes.
