HM Revenue & Customs (HMRC) has won a decisive battle against a widely-marketed scheme to avoid stamp duty land tax.
The taxman believes the decision could save more than £170 million for the UK Exchequer.
Regulations have also been laid that will force users of a wider range of stamp duty land tax (SDLT) avoidance schemes to disclose them to HMRC.
HMRC claims the new rules will give it much better access to information about these avoidance schemes and those who promote and use them. They can then be challenged and closed down more quickly.
The case involves an aggressive SDLT avoidance scheme which a number of accountancy firms have been promoting.
A company in the Vardy group wanted to acquire property costing £7.25 million, 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.
However, 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.
“This victory at the First Tier Tribunal sends a clear message to tax avoiders that we will challenge avoidance relentlessly,” said Jim Harra, HMRC’s director general of business tax.
“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.
“People who are tempted by tax advisers 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.”
