beorhthelm
A. Virgo, Football Genius
- Jul 21, 2003
- 36,019
thats geniously simple.
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How to avoid paying stamp duty??
- Thread starter Dex10
- Start date
thats geniously simple.
It's not new either. Some people do it on a personal level. George Best lived in a flat which he rented off a company he owned. It saves on tax in some areas, but it can complicate things further down the line and lead to tax being due in areas where it would not if it was a regular ownership scenario. I think capital gains is one of the issues.
Bold Seagull
strong and stable with me, or...
http://www.hmrc.gov.uk/manuals/sdltmanual/SDLTM80840.htm
http://www.hmrc.gov.uk/manuals/sdltmanual/sdltm80810.htm
As far as I can tell, the HMRC do only have 9 months to open an enquiry and challenge the application for reasons not to pay the SDLT.
Recovery by assessment is possible up to 6 years from the date of completion. If SDLT is not paid due to fraud or negligence the enforcement period is up to 21 years.
ILOVEBHA
Member
It sounds like the same scheme we currently offer however you are not quite right when you mention the 9 months period.
HMRC’s standard enquiry window is 9 months and 30 days from date of registration of the property. During
this period, HMRC may open an enquiry into any property transaction for any reason whatsoever.
Outside of this period, HMRC has up to 4 years to open a ‘discovery assessment’ providing they are able to
prove certain criteria. In our experience, HMRC very rarely make use of discovery assessments and in fact
recently reduced the window during which these assessments can be made.
Bold Seagull
strong and stable with me, or...
I think what they are saying is that you have made a formal application for SDLT exemption for which the HMRC have 9 months to undertake an enquiry into that application. Your point has to be a major consideration, and something that would perhaps put me off doing it, but that is for fraud or negligence. The application made on your behalf is not supposedly fraudulent in any way. Interestingly, they will use your own solicitor to go through the application on your behalf. I think they are confident there is nothing illegal, or why would they be happy for your own legal counsel to be involved?
ILOVEBHA
Member
Dont forget that if you do use your own solicitors then you will have to pay two lots of solicitors fees as the panel solicitors would still need to be used as they are experts in the scheme but you are more than welcome to do this.
Bold Seagull
strong and stable with me, or...
Yes, and as I understood, once they've opened that enquiry, the purchasers solicitor will keep the £10k (example) for the SDLT until that is resolved. Am I right in saying the whole application is legal, but based on your final point that they rarely undertake the assessment enquiry?
So, by your own admission your scheme cannot be deemed a success at least until 4 years from the time of purchase?
ILOVEBHA
Member
Absolutely it is a legal tax strategy
The schemes that we use are all supported by opinions from leading experts in the field of Stamp
Duty. We also have a panel of conveyancing firms, all of whom are independent and all of whom
have carried out due diligence and compliance before becoming involved in the schemes. HMRC
are notified where necessary of the plans and have provided written acknowledgment of such. Our
plans are no less valid or legal than any other form of tax planning, the aim of which is always to
minimize the tax liability of the client
So, your scheme is based on not paying and keeping your fingers crossed the HMRC do not come knocking for 4 years?
As an aside, I dispute this 4 year period as per Driver8's post.
ILOVEBHA
Member
No this is not true.
HMRC have 9 months and 30 days to open an enquiry and to date after almost 5000 cases we have had one open which was dealt with and case closed within a week.
The extra 4 year discovery assesment can only be opened if HMRC are able to prove certain criteria which to date they have not and in fact have reduced the window recently.
Just to clarify you are offering the scheme whereby a company owns the property and the owner buys the company which owns the property?
Bold Seagull
strong and stable with me, or...
I think you've misread the post. The scheme is based on the application for SDLT exception which must be challenged by an enquiry within 9months + 30 days from the date of that application. If challenged within that period, then the process can take 4 years, but it cannot be challenged after that period. As the customer, you've lost nothing as you wouldn't be paying for the scheme in the event of the enquiry starting. Your exposure is that after 4 years you may owe the SDLT in full as you did in the first place, and the tax planners get nothing for the failure. That's how I understood it.
I think I am correct in saying that the HMRC are looking into this. The chap at John Charcol mentioned this a while back. Just because they have not proven the 'certain criteria' at present does not mean they will not in the future. They have 4 years to do it after all. You cannot be 100% sure of success until at least 4 years from what you are saying.
ILOVEBHA
Member
All i can say is that you will always own the property
ILOVEBHA
Member
I always find it funny that people who have never used the scheme are so adamant that it does not and will not work.
We are currently saving people a lot of money and they all seem very happy.....as i have said these schemes are not for everyone but you should always be made aware of the fact that they are available.
We are currently saving people a lot of money and they all seem very happy.....as i have said these schemes are not for everyone but you should always be made aware of the fact that they are available.
I have never used the scheme because I was advised not to. I was in a position where I had a number of options on the title configuration of a property as well. My advisor mentioned I might have heard of these schemes but he suggested avoiding them as they are subject to challenge with the very strong likelihood (in his opinion) they will not be proven to work.
I'm sorry but nothing you have said or suggested is making me change my opinion. Nothing you have said is water tight or 100% either. It will all come down to a test case sometime in the future. If the HMRC loose then fair play. You were right.
Version 1
Stamp Duty Land Tax Avoidance Schemes
At the time of writing, our assessment is that none of the avoidance schemes that we have
fully analysed has the effect the promoters claim – either because the general SDLT
provisions do not apply in that way or because the targeted anti-avoidance rule operates to
neutralise any tax advantage.
Challenging avoidance
We are now challenging all schemes which we have identified as being in use. These include
where:
• a sub-sale is combined with the subsequent distribution of the property in the form of
a dividend in specie
• a sub-sale is combined with a subsequent claim to alternative finance relief
• it is claimed that combining a sub-sale with a transaction involving a partnership
reduces the consideration chargeable to SDLT by virtue of the special partnership
computational rules
• a sub-sale is combined with a transfer by deed of gift or assignment.
We are starting a process of comparing transactions reported to the land registry with land
transaction returns made to HMRC. Where there is a discrepancy and we hold a return we
will risk assess that return with a view to undertaking a compliance check. HMRC will also
consider making a ‘discovery assessment’ for the cases where a return has been submitted
and the 9 month enquiry window has passed if the return and any accompanying documents
do not fully disclose the details of the scheme used. Where a transaction has been notified to
HM Land Registry but no SDLT return has been submitted, purchasers face the prospect of
receiving a determination of the SDLT that HMRC believes to have been under-declared.
We will also be using the full range of HMRC information powers to identify and challenge
promoters and scheme users who fail to notify us of the marketing or use of disclosable
schemes.
Promoter disclosures
We are aware of a number of cases where it has been claimed that the issue of a Scheme
Reference Number (SRN) under the disclosure regime has been a sign that HMRC accepts
the scheme has the effect claimed by the promoter. That is simply not true. The issue of a
SRN is merely confirmation that HMRC has received the disclosure and is now aware that the
scheme is being marketed.
Version 1
Time limits
The legislation governing the enquiry process makes it clear that the period for opening
enquiries runs from the later of the filing date, the date the return is delivered and the date a
return is amended. It has come to our attention that some scheme users (or their advisers)
are submitting a letter of disclosure giving details of transactions entered into but without
submitting an SDLT return in relation to those transactions. We do not accept that, on its own
- the submission of a letter of disclosure, or
- a notification by a promoter or a user of a scheme
establishes a time limit for an HMRC enquiry.
Unless a user makes a return, recovery of the tax by assessment is currently possible up 6
years after the effective date of the transaction (up to 21 years where there is fraud or
negligence).
Penalties
From 1 April 2010 the penalty regime at Schedule 24 Finance Act 2007 was extended to
stamp taxes by Schedule 40 Finance Act 2008. Whilst HMRC acknowledges that people will
sometimes make mistakes, we will relentlessly pursue those who deliberately bend or break
the rules – including, where appropriate, seeking penalties.
HMRC Stamp Taxes 110110
Stamp Duty Land Tax Avoidance Schemes
At the time of writing, our assessment is that none of the avoidance schemes that we have
fully analysed has the effect the promoters claim – either because the general SDLT
provisions do not apply in that way or because the targeted anti-avoidance rule operates to
neutralise any tax advantage.
Challenging avoidance
We are now challenging all schemes which we have identified as being in use. These include
where:
• a sub-sale is combined with the subsequent distribution of the property in the form of
a dividend in specie
• a sub-sale is combined with a subsequent claim to alternative finance relief
• it is claimed that combining a sub-sale with a transaction involving a partnership
reduces the consideration chargeable to SDLT by virtue of the special partnership
computational rules
• a sub-sale is combined with a transfer by deed of gift or assignment.
We are starting a process of comparing transactions reported to the land registry with land
transaction returns made to HMRC. Where there is a discrepancy and we hold a return we
will risk assess that return with a view to undertaking a compliance check. HMRC will also
consider making a ‘discovery assessment’ for the cases where a return has been submitted
and the 9 month enquiry window has passed if the return and any accompanying documents
do not fully disclose the details of the scheme used. Where a transaction has been notified to
HM Land Registry but no SDLT return has been submitted, purchasers face the prospect of
receiving a determination of the SDLT that HMRC believes to have been under-declared.
We will also be using the full range of HMRC information powers to identify and challenge
promoters and scheme users who fail to notify us of the marketing or use of disclosable
schemes.
Promoter disclosures
We are aware of a number of cases where it has been claimed that the issue of a Scheme
Reference Number (SRN) under the disclosure regime has been a sign that HMRC accepts
the scheme has the effect claimed by the promoter. That is simply not true. The issue of a
SRN is merely confirmation that HMRC has received the disclosure and is now aware that the
scheme is being marketed.
Version 1
Time limits
The legislation governing the enquiry process makes it clear that the period for opening
enquiries runs from the later of the filing date, the date the return is delivered and the date a
return is amended. It has come to our attention that some scheme users (or their advisers)
are submitting a letter of disclosure giving details of transactions entered into but without
submitting an SDLT return in relation to those transactions. We do not accept that, on its own
- the submission of a letter of disclosure, or
- a notification by a promoter or a user of a scheme
establishes a time limit for an HMRC enquiry.
Unless a user makes a return, recovery of the tax by assessment is currently possible up 6
years after the effective date of the transaction (up to 21 years where there is fraud or
negligence).
Penalties
From 1 April 2010 the penalty regime at Schedule 24 Finance Act 2007 was extended to
stamp taxes by Schedule 40 Finance Act 2008. Whilst HMRC acknowledges that people will
sometimes make mistakes, we will relentlessly pursue those who deliberately bend or break
the rules – including, where appropriate, seeking penalties.
HMRC Stamp Taxes 110110
Uncle Spielberg
Well-known member
In today's industry trade magazine , Mortgage Strategy
Home Economy .Beware of Stamp Duty avoidance schemes, says law firm
24 October 2011 | By Natalie Thomas
Law firm Boodle Hatfield says it is seeing a growing number of people turning to schemes that offer ways to avoid paying Stamp Duty.
It says HMRC is taking an increasingly dim view of such schemes being offered, usually via the internet.
The firm says an increasing number of wealthy individuals are buying property through companies, often located offshore, to avoid paying Stamp Duty, which it says could be fuelled by the increase earlier in the year of the Stamp Duty rate to 5% on properties valued over £1m.
Ian Montgomery, a solicitor specialising in tax at Boodle Hatfield, says: “There is a growing belief that it is possible to avoid paying Stamp Duty on the purchase of a property or land, but unless particularly aggressive tax planning is undertaken that is just not the case.
“It is a common misconception that it is possible to purchase a property using a company and avoid Stamp Duty.
“When a property is purchased through a company, whether based offshore or in the UK, it pays the same rate of Stamp Duty as if it where an individual. Stamp Duty may be avoided by future purchasers when the company decides to sell the property. This is done by the owner selling shares in the company rather than the property itself, but Stamp Duty will be paid on the initial purchase.”
Stamp Duty on the purchase of shares stands at 0.5%, rather than the four or 5% on property. If the company is based offshore the purchase of shares is exempt from Stamp Duty entirely.
On a residential property valued at £2m, the purchaser could save £90,000 from purchasing the shares in a UK company holding the property as opposed to purchasing the property direct.
Montgomery adds: “The seller may also be able to negotiate a higher purchase price for the shares so that the Stamp Duty saving is basically split between the parties,”
He says it is possible however to reduce exposure to Stamp Duty by taking advantage of the one or more of the reliefs and/or exemptions contained within the Stamp Duty rules.
He adds: “One such example is to reduce the purchase price of a property subject to Stamp Duty by attributing part of the purchase price to chattels and any other assets not liable to Stamp Duty, as long as the amount attributed to these assets does not exceed their real value.”
It says there are other more aggressive ways of actively avoiding Stamp Duty being promoted, often via the internet, but HMRC is actively targeting such schemes.
Montgomery adds: “Such schemes can be considered very aggressive tax planning and HMRC is taking an increasingly dim view and is prepared to challenge them through the Tax Tribunal. They often rely on HMRC not chasing individuals who engage in them, and this is a very risky strategy. Our advice would always be to steer clear of such schemes.”
Home Economy .Beware of Stamp Duty avoidance schemes, says law firm
24 October 2011 | By Natalie Thomas
Law firm Boodle Hatfield says it is seeing a growing number of people turning to schemes that offer ways to avoid paying Stamp Duty.
It says HMRC is taking an increasingly dim view of such schemes being offered, usually via the internet.
The firm says an increasing number of wealthy individuals are buying property through companies, often located offshore, to avoid paying Stamp Duty, which it says could be fuelled by the increase earlier in the year of the Stamp Duty rate to 5% on properties valued over £1m.
Ian Montgomery, a solicitor specialising in tax at Boodle Hatfield, says: “There is a growing belief that it is possible to avoid paying Stamp Duty on the purchase of a property or land, but unless particularly aggressive tax planning is undertaken that is just not the case.
“It is a common misconception that it is possible to purchase a property using a company and avoid Stamp Duty.
“When a property is purchased through a company, whether based offshore or in the UK, it pays the same rate of Stamp Duty as if it where an individual. Stamp Duty may be avoided by future purchasers when the company decides to sell the property. This is done by the owner selling shares in the company rather than the property itself, but Stamp Duty will be paid on the initial purchase.”
Stamp Duty on the purchase of shares stands at 0.5%, rather than the four or 5% on property. If the company is based offshore the purchase of shares is exempt from Stamp Duty entirely.
On a residential property valued at £2m, the purchaser could save £90,000 from purchasing the shares in a UK company holding the property as opposed to purchasing the property direct.
Montgomery adds: “The seller may also be able to negotiate a higher purchase price for the shares so that the Stamp Duty saving is basically split between the parties,”
He says it is possible however to reduce exposure to Stamp Duty by taking advantage of the one or more of the reliefs and/or exemptions contained within the Stamp Duty rules.
He adds: “One such example is to reduce the purchase price of a property subject to Stamp Duty by attributing part of the purchase price to chattels and any other assets not liable to Stamp Duty, as long as the amount attributed to these assets does not exceed their real value.”
It says there are other more aggressive ways of actively avoiding Stamp Duty being promoted, often via the internet, but HMRC is actively targeting such schemes.
Montgomery adds: “Such schemes can be considered very aggressive tax planning and HMRC is taking an increasingly dim view and is prepared to challenge them through the Tax Tribunal. They often rely on HMRC not chasing individuals who engage in them, and this is a very risky strategy. Our advice would always be to steer clear of such schemes.”