Monday, November 28, 2011
Tax temptation of the week: Stamp Duty Land Tax avoidance
The Saturday Times* was headlined with reference to a story about how the 'super-rich' avoid paying Stamp Duty Land Tax (SDLT) when they buy their mansions.
Simply stated the property doesn't change hands. The purchaser buys the shares in a limited company that owns the property. As long as the company itself doesn't sell the property there is no SDLT to pay.
Easy? Not at all. How to do you get the property into a limited company in the first place without paying SDLT? There are many complex tax related minefields to negotiate to make such a plan work. And it costs thousands of pounds to find out if it would be possible and to navigate the minefields.
Please do not be fooled into thinking that any of this is something to consider doing for the sort of properties that we normal mortals can afford. And there are no other simple ways to avoid SDLT any more, as I explained in May when answering the question: Are stamp duty avoidance schemes worth the money?
A similar view to mine was shared on CityWire in March. They explained: The chancellor has finally clamped down on stamp duty avoidance schemes widely used by rich individuals buying high value residential properties as well as buyers of commercial properties.
And I note that Solicitors have been advised by the Law Society not to get involved in SDLT schemes. That, I think, says it all.
The real issue here is the jealousy that the Times story generates. We don't like paying SDLT. The media are highlighting the facility available to the super-rich and we are in uproar that they can avoid this tax. But how many readers would choose to pay hundreds of thousands or millions of pounds in tax on a new property if there was a reliable legal way to avoid doing so?
So we agree that the 'loophole' should be plugged. Will it be? Don't hold your breath.
*As The Times story is behind their paywall I have linked to a rehash of the same story on the 'This Is Money' website.