Conveyancing Solicitors are frequently asked about schemes for avoiding paying stamp duty land tax (SDLT) when buying a home. These schemes are commonly known as 'Stamp Duty Mitigation'.
No-one likes paying more tax than they need to, and these schemes are widely advertised on the internet as being approved by the Revenue.
In fact the majority of Conveyancing Solicitors point blank refuse to have anything to do with such schemes. This view is reinforced by the latest information and draft regulations just issued by HM Revenue & Customs. This makes it clear that the Government is intent on taking action to stop them.
A consultation paper* on proposed changes to the law targets those schemes which seek to take advantage of the ‘transfer of rights’ rules available on sub-sales. Some SDLT avoidance schemes claim that the current rules can be exploited to reduce or eliminate SDLT by setting up artificial sub-sales.
The paper makes it clear that HMRC considers the rules when read correctly do not contain the perceived loopholes, but wants to improve the legislation to eliminate such claims in future. It also states that existing anti-avoidance provisions may apply to these schemes, and that they could be successfully challenged in court.
If the current schemes are held to be unlawful at some time in the future, buyers face the risk of being forced to pay not only the full stamp duty but also substantial penalties for late payment. They could also face criminal charges.
The Government has also just published changes to the Disclosure of Tax Avoidance Schemes (DOTAS)** regime for SDLT avoidance. This will require more transactions to be reported to HMRC.
The Solicitors Regulation Authority has warned Conveyancing Solicitors of the risks of promoting and executing these kinds of avoidance arrangements. Most do not recommend them, as they do not want clients facing legal challenges by HMRC (and also because they could face penalties themselves. )
Fridaysmove recommends that buyers do not use any such arrangements.