Monday, May 16, 2011

Are stamp duty avoidance schemes worth the money?

I was intrigued by a response to one of the Questions of Money items in the Times on Saturday. I had asked a similar question of a top stamp duty tax lawyer during the week.

The questioner in The Times noted that he was:
"looking to buy a two-bedroom flat in London and was contacted out of the blue by an outfit selling a stamp duty avoidance scheme."
Was it effective or too good to be true?

The answer contained good advice to the questioner that it really wouldn't be a good idea.
"The risk is that you pay a [promoter] a substantial sum to avoid tax, HMRC get wind of it, closes down the scheme and you end up having to pay stamp duty [land tax] after all, having already forked out the fee."
These schemes rely on the naivety and greed of people who object to paying stamp duty land tax. They are no doubt advised that the scheme is legal and robust. Why should anyone question this?

Last week I asked a top stamp duty tax lawyer his opinion of SDLT avoidance schemes. He said that there are NO off-the-shelf schemes around any more that work and which are legal. The anti avoidance tax changes in recent years have had the desired effect. In effect, unless one is spending more than a £1m and is willing to enter into convoluted transactions that can be complex to unwind, SDLT tax avoidance is dead.

You wouldn't think so if you look online for SDLT avoidance schemes. One promoter claims they can save you tax on the acquisition of properties worth more than £250k. At least two others set a minimum of £500k.

If you are still tempted, you may feel there is nothing to lose if the promoter promises to refund the fee if the taxman forces you to pay the tax. But who knows whether the promoter will be around, contactable, able and willing to refund the fee when that happens? In which case you would be well out of pocket and you will have had the deep joy of facing a tax enquiry. They're not much fun. Still; each to their own.



4 comments:

  1. Patrick Cannon the leading tax barrister on Stamp Duty would disagree with the comments posted by your stamp duty lawyer that there are "no schemes around any more that work and which are legal".

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  2. Great article Mark.
    I attend a lot of property networking events and mix with many people who have built large portfolios using creative strategies (creative NOT illegal). The companies who offer these stamp duty avoidance schemes are always prominent. Indeed one well known company advised that many MPs had used these systems including the Chancellor of the last government!! I find that a little hard to believe, not because of the integrity of MPs, but because Mr. Heslop and Private Eye would be on their case before HMRC. But there is definitive wide-ish spread use of these schemes.

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  3. Thanks for your comment but I think you may have missed my point.

    I'm not talking about illegal SDLT evasion but about the so-called 'Creative' schemes that the promoters claim will avoid a liability to SDLT through legal (but contrived and 'abusive') means.

    Whether any such schemes will ultimately prove to be successful or not will remain unclear for some time.

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  4. And in reply to Nicholas I also think you have missed the point. What I was told (and believe to be true) is that "there are NO off-the-shelf schemes around any more that work and which are legal."

    I very much doubt that Patrick or any other SDLT specialist Barristers are promoting off-the-shelf schemes any more.

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