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HMRC have claimed success in their attempts to shut down an aggressive scheme for avoiding stamp duty land tax (SDLT), which had been widely marketed by accountancy firms.
The department hopes to have saved more than £170m for the Exchequer, subject to an appeal, after winning its legal case against the misuse of sub-sale relief by the Vardy Property Group, which aimed to avoid paying £290,000 of SDLT on the direct purchase of a £7.25m business park.
The Durham-based group structured the deal through a newly formed unlimited company, which distributed the property as a dividend to the shareholder company, arguing 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 tax.
The First Tier Tribunal found the avoidance scheme was flawed and SDLT was due because the unlimited company had not properly carried out company law requirements for declaring a dividend, and the ultimate owner of the property had indirectly provided the purchase price.
The Revenue’s director general of business tax, Jim Harra, claimed the tribunal’s ruling “sends a clear message to tax avoiders that we will challenge avoidance relentlessly… It shows that the courts will see through arrangements that are put in place just to avoid tax.”
As a result of the taxman’s legal victory, the government today introduced new regulations for the disclosure of tax avoidance schemes meant to ensure that sub-sale arrangements have to be revealed to HMRC by their promoters and users.
Schemes involving residential property with a value up to £1 million and the commercial equivalent worth no more than £5 million will have to be disclosed in the same way as arrangements involving more valuable properties.
“This government has been clear that when someone buys a house in the UK they must pay stamp duty,” said the Exchequer secretary to the Treasury, David Gauke.
“Today’s legislation will mean HMRC will have access to more information about property tax avoidance. They will not hesitate to use it to close down avoidance schemes.”
