Stamp Duty Land Tax – latest HMRC Avoidance Case Victory

Based on previous recent verdicts, the latest First Tier Tribunal judgment in favour of HMRC against an annuity-based Stamp Duty Land Tax (SDLT) avoidance scheme was no real surprise.  Although the taxpayer (himself a self-proclaimed property tax specialist, who had implemented the same scheme for numerous clients) has the opportunity to appeal the verdict, the conclusion reached was damming on a number of fronts.  Most notably:

  • The scheme did not operate as intended and (as a result) there was no SDLT saving
  • Even if there had been an effective SDLT saving, the scheme would have been overturned by well-founded tax avoidance principles (under the ”Ramsey” doctrine)
  • HMRC were correct in applying significant penalties to the underpaid tax, due to the taxpayer’s “deliberate” actions

The public judgment also revealed that the original HMRC queries into the purchase stemmed from a Code of Practice 8 enquiry into the taxpayer’s wider business affairs – a UK business, registered in the British Virgin Islands with a head office in Guernsey.

Just goes to highlight, when it comes to tax planning it’s important to know who you’re dealing with, as well as what you’re dealing with.  In SDLT terms, fortunately, these sorts of aggressive SDLT schemes are becoming a thing of the past.  There are still a number of statutory reliefs available to reduce levels of SDLT payable on property purchases which, whilst often missed, don’t come with this kind of warning.

If you wish to discuss SDLT or any property tax matters, please contact one of our Private Client tax team.