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Taylor Bracewell - STAMP DUTY LAND TAX.END OF THE LINE FOR AVOIDANCE SCHEMES?

There are a number of Stamp Duty Land Tax avoidance schemes which the risk-taking investor can take advantage of, but the Revenue is now taking an aggressive stance in tackling these. 

Most schemes base their rationale on complex property structures and holdings and rely on the Revenue either not chasing individual cases, or not enforcing after a particular period.  This is risky, because the Revenue has six years to review the transaction and has power to levy the tax if it thinks that a series of transactions has been structured with the intention of avoiding the tax, so all the complex arrangements can be set aside anyway!

A number of schemes are targeting company owners to buy into a company and use a transaction offshore to avoid the tax.  This may not work.  Acquisition of a chargeable interest in property in the UK creates a trigger for Stamp Duty Land Tax, even if the transaction itself takes place offshore.

There is a potential saving if the land holding company is itself sold, i.e. the purchaser buys the shares of a property-holding company, as the Stamp Duty is payable at 0.5% of the value of the shares, as opposed to the stepped values of 1% at £150,000 to 5% at £1m or greater for a pure property transaction.

Similarly there is a potential saving if the transaction includes assets at the property which can be deducted from the cost for the purposes of the tax, but only to the extent of their actual value.

It is wise to take professional advice on schemes which purport to save the tax, as the approach taken by the Revenue seems, from the materials available, to be less focused on the structure of the transaction and more on the end result, i.e. avoidance of the tax.

This sows uncertainty as it is difficult to rely on previous transactions and rulings if the Revenue has an overriding power to levy the tax for what they consider to be a scheme.

For further advice and information about any commercial property issue, please contact commercial property solicitor Paul Hawkes on 01302 341414 or email paul@taylorbracewell.co.uk