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The Revenue has moved to clarify its approach to tackling stamp duty land tax (SDLT) dodging.
The department’s action follows a meeting between the British Property Federation, the Chartered Institute of Taxation, the Law Society, the Stamp Taxes Practitioners’ Group and HMRC Stamp Taxes, to discuss SDLT group relief and the application of the targeted anti-avoidance rule in FA 2003, Sch 7 para 2(4A), in the context of intra-group asset transfers following corporate acquisitions.
The Revenue has moved to clarify its approach to tackling stamp duty land tax (SDLT) dodging.
The department’s action follows a meeting between the British Property Federation, the Chartered Institute of Taxation, the Law Society, the Stamp Taxes Practitioners’ Group and HMRC Stamp Taxes, to discuss SDLT group relief and the application of the targeted anti-avoidance rule in FA 2003, Sch 7 para 2(4A), in the context of intra-group asset transfers following corporate acquisitions.
Representative bodies were concerned that genuine commercial transactions have stalled in the face of uncertainty about the application of the anti-avoidance measure to certain common transaction patterns. Concern about para 2(4A) previously led to the taxman issuing of a list of transactions in which group relief would not be denied (see the SDLT manual at SDLTM23040).
The Revenue confirmed, following the meeting, that “a business may choose to acquire a property-owning company as opposed to acquiring the property from that company. The purchaser may, after acquiring the company, transfer the property out of the company acquired and into a different company in the purchasing group.
“HMRC do not regard that of itself, and subject to the list of transactions mentioned above, as resulting in the avoidance of tax such that para 2(4A)(b) would be in point, even if the acquisition of the property-owning company and the subsequent intra-group transfer of the property formed part of the same arrangements.
“The purchaser may, after acquiring the company and transferring the property intra-group, liquidate wind-up or strike-off the company acquired. HMRC do not regard that of itself as resulting in, or being evidence of, the avoidance of tax such that para 2(4A)(b) would be in point, even if the liquidation, winding-up or striking-off formed part of the same arrangements that also included the acquisition and the intra-group transfer,” the department added.
“In the scenarios described above, the para 2(4A)(b) analysis would be the same even if the purchaser only became a member of a group for SDLT purposes as a result of the acquisition of the property-owning company.”
Paul Emery, stamp duty land tax expert at PwC, claimed the Revenue's announcement “brings to an end a considerable period of uncertainty, and will help get transactions moving”.
He said, “HMRC have acknowledged that buying companies instead of their individual assets is normal commercial practice. It is acceptable for a business to acquire a property-owning company and then transfer the property to a different company in the group and that SDLT group relief will not be denied on this basis alone.”
