As we reported earlier this year the Inland Revenue have Stamp Duty Tax Avoidance Schemes very much in their sights. Although no new guidance has been produced the Revenue have sent another warning shot across the bows in the new Stamp Taxes Bulletin http://www.hmrc.gov.uk/so/bulletin-12011.htm
Again it highlights that schemes revolving around:
- alternative finance relief; and
do not work and will be subject to challenge. Further detailed guidance is stated to follow at the end of the year.
We have dealt with a number of enquires both from estate agents and clients over recent years about whether these stamp duty tax avoidance schemes work. There appears to be a new industry of “tax advisers” (using that term loosely) who promote what appear to be risk free solutions to stamp duty liability even on relatively low value residential property. This is either through the internet or via estate agents/financial advisers/accountants serving affluent areas and clients.
The schemes are often supported by guarantees of success, legal opinions, promises to challenge any IR ruling or money back but this is of little practical comfort if the promoter is really only a limited company with no assets. The fees for these schemes are also high – half the stamp duty saving is often charged so it is big business.
Much of the success of such schemes appears to stem from the historic inability by the Revenue to investigate, whether through lack of resources or otherwise, within the 9 month enquiry window. As noted above that lax approach cannot be guaranteed for future transactions.
Of the”off the peg” schemes we have seen (and promoters keep the details secret until you are committed to purchase their product) there is little to distinguish them from the schemes targeted above and which clearly fall foul of section 75a of the Finance Act 2003 http://www.hmrc.gov.uk/so/section-75a.htm
It seems to us that many off the peg schemes, if investigated, are likely to fail this hurdle and realistically only bespoke schemes will work in the current environment. The cost of such bespoke schemes for the normal residential purchaser are likely to be prohibitive and even then they will not be without risk. As a final nail many lenders (especially the goverment backed ones) have indicated a growing reluctance to get involved with such schemes.
A spokesman for the Council of Mortgage Lenders said: “These types of schemes are relevant only to a niche market and it is unlikely that most mainstream lenders will accept such arrangements on their mortgage business. In the private client and high net-worth market, private banks will be assessing cases both for their own regulatory compliance and for their business risk.”
You have been warned.
For further advice on Stamp Duty matters and high value residential property transactions call Mark Sadler or Fred Rylah at kenneth elliott + rowe 01708 757575 or email firstname.lastname@example.org