- This topic has 1 reply, 1 voice, and was last updated 29th April 2011 at 3:22 pm by Patrick.
26th April 2011 at 3:54 pm #541Alastair JohnstonGuest
The Finance Bill contains yet more SDLT anti-avoidance rules. One is aimed at exchanges. On reading the HMRC Press Notice about it, I contacted the relevant person at HMRC with a question, repeated below. (I have edited it to show the correct FB reference) One month later, he has not got back to me, so I would be grateful for your thoughts (or those of other contributors).
One problem I can see is that while S75A was a new section inserted, so that it was easy to see how the law had previously stood, FB Schedule 21 amends para 5 sch 4 FA 2003 so that the old version will no longer be apparent. Is this relevant?
“My client is about to contract for a sale and lease back transaction. In recent years we have relied on HMRC SDLT Manual para 4140 – http://www.hmrc.gov.uk/manuals/sdltmanual/SDLTM04140.htm – to pay SDLT on the VAT-exclusive market value of property in similar transactions. This approach has been disclosed to HMRC several times by my firm or by English solicitors dealing with other properties in the same deals. It appears to me that HMRC consider that SDLT paid on the VAT-exclusive MV is the appropriate amount of tax, and that to pay on that basis is not to avoid tax.
Comparing the new draft legislation with S75A to S75C FA 2003, both have the express aim of preventing avoidance. S75A is titled “anti-avoidance” and Clause 82 of the Finance Bill states in the body of the clause that it is to prevent avoidance. HMRC’s most recent (28 Feb 11) guidance on S75A states that you will not seek to apply it where transactions have been taxed appropriately.
Could you please tell me whether, in your view, Clause 82 would apply to a sale and leaseback transaction where no other property transaction or tax planning is involved?”29th April 2011 at 3:22 pm #542PatrickGuest
I think that the amendments made by Sch 21 of the Finance Bill to para 5 of Sch 4 FA 2003 apply regardless of any tax avoidance motive. I suspect that the references to tax avoidance in the enabling provision are there largely for presentational reasons.
I take it that you act for the purchaser and in that case it seems to me on an initial reading of the changes that if the cash price paid by your client including VAT is higher than the market value of the property acquired excluding VAT then your client has to use the cash price as the basis for the SDLT computation.
I am touched that you expected a reply from HMRC to your question. They are far too busy looking after their “customers”!