Do You Pay Stamp Duty on a Commercial Lease?
SDLT on commercial leases can be very complex. Many tenants are unaware that Stamp Duty Land tax is payable on commercial leases – and may be...
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Have you ever bought a Stamp Duty avoidance scheme? Are you being chased by HMRC for money owed as a result of having avoided paying Stamp Duty? If so, it’s possible you can be protected.
Back in 2003, the government introduced Stamp Duty land tax (SDLT) – a tax that has to be paid on any property bought in England and Northern Ireland.
SDLT contains many conditions and exclusions, and most individuals and businesses rely on conveyancers, solicitors and legal advisors to ensure that they are paying the right amount of Stamp Duty.
Between 2003 and 2015, there were a number of SDLT avoidance schemes available, offering clients the opportunity to avoid paying Stamp Duty by finding loopholes in HMRC’s conditions and exclusions.
HMRC has since clamped down on these schemes and is now trying to reclaim the Stamp Duty tax owed to them by individuals and businesses as far back as 2003.
This can come as a huge shock and has led to a great deal of stress and financial difficulty for anyone who has used tax avoidance schemes or followed the advice on reducing SDLT.
What a lot of people don’t realise is that they might be protected from paying the SDLT avoidance penalties. If you or your business were mis-sold a scheme, or if you’re being charged more SDLT than you originally owed, a tax barrister can advise you, manage the appeal processes and represent your case.
Also known as SDLT mitigation schemes, these are designed to take advantage of loopholes in the SDLT laws, in order to save clients money on their property purchase.
By encouraging clients to carry out their purchase in an unnecessarily complex way or by adopting a novel and unrealistic interpretation of the SDLT provisions, these schemes claim to enable buyers to avoid the higher SDLT charges on purchases of real estate.
Because of the complexities of these SDLT avoidance schemes, buyers can end up carrying out additional land and property transactions, selling units from the property or transferring the property to different buyers during the purchase process. In these cases, HMRC can charge the buyers SDLT on more than one element of the purchase.
You might hear about something called Section 75A of the Finance Act, in connection with SDLT avoidance schemes. This anti-avoidance rule was introduced in late 2006 in an attempt to counter the sort of complex Stamp Duty avoidance schemes mentioned above.
It aims to counter SDLT avoidance by telescoping multiple steps inserted into a property transaction and taxing the end result on the highest amount passing in the chain of transactions.
HMRC has taken major players to court over these tax avoidance actions. You may have heard about Hannover Leasing or Project Blue – where the taxpayers were found to be liable for Stamp Duty under the rules set out in Section 75A. In both cases, the companies were found liable to pay Stamp Duty, even though they said they had not used tax avoidance schemes.
Anyone who is facing investigation or an assessment on an SDLT avoidance schemes where section 75A is in issue, will need an experienced tax barrister who understands the ins and outs of section 75A to guide them through the process and to represent them in the tax tribunal.
Any person or business which has avoided paying full SDLT on residential or commercial properties is likely to be investigated, with the possibility of penalties and potential litigation.
Any organisation (usually banks, tax service providers or a securities house) promoting or creating a tax avoidance scheme are likely to have to submit a DOTAS (disclosure of tax avoidance schemes) to HMRC.
If you have used or are using a tax avoidance scheme, you will be charged interest on top of the SDLT due. You’re also likely to be charged a penalty for an inaccurate return.
You may be charged a penalty for an inaccurate return because of ‘carelessness’, unless you can demonstrate that you took ‘reasonable care’. You can also face a higher penalty for deliberate inaccuracies.
A tax lawyer can help you to prove that you took reasonable care to send HMRC accurate tax returns and other documents. They can also help to demonstrate that any inaccuracies were not deliberate. These cases can lead to criminal investigations, where a tax barrister should defend you in court.
Find more information on tax avoidance schemes and penalties here.
If you feel you were the victim of false advertising in terms of the tax avoidance scheme, a tax barrister can help you appeal against the SDLT penalties and advise you on whether you may have a case against your scheme provider.
If HMRC is seeking double charges on different steps of a scheme, a tax barrister can help to ensure you only pay one lot of SDLT for the entire scheme transaction.
Many buyers paid tax avoidance scheme fees of up to 50% of the saving that was promised by the promoter, not to mention the costs of implementation. Again, a tax barrister can help you to recover those costs.
Patrick Cannon has been advising on Stamp Duty for over 35 years, first as a solicitor and latterly as a barrister. This experience has given him expertise in helping individuals and businesses negotiate the complexities of Stamp Duty, SDLT reliefs and higher rates of SDLT.
As a barrister, he represents individuals and companies in appeals against HMRC and can offer advice that could save your company money.
For tax advice and representation in a Stamp Duty Land Tax case with one of the UK’s leading specialist SDLT tax advisers, please contact Patrick Cannon, an SDLT advisor here.