Stamp duty mitigation scheme - is it for real?

skintchick

We have at long last found a house to buy and had our offer accepted :j and our mortgage advisor is talking about using a solicitor who can deal with the Stamp Duty Mitigation Scheme, which basically seems to be a way of paying less stamp duty, legally.

However, I only want to use the solicitor he recommends if this scheme is legal, and not risky, as otherwise we would just use a local firm.

We stand to save around 3k so it's not a load of money, but every little helps.

does anyone know about this scheme? can you advise? (in a non-legal manner of course!).

If there is already a thread on this please can you link to it for me? Thank you

jonewer

It depends on what the scheme is. Be careful, many of these schemes have confidentiality clauses.

Keith

I completely agree with the poster above.

bitsandpieces

Firstly there's an ethical issue with this: you're likely to pay about 50% + VAT of the SDLT you would have paid to a private company/individual. The amount of tax you avoid paying (and that will ultimately land on other taxpayers instead) is therefore a lot more than you'll save. This may or may not worry you.

Secondly, I find it hard to believe that these schemes don't carry risks. Some discussion here http://www.taxationweb.co.uk/forum/sdlt-mitigation-scheme-t28510.html#p107327 Depends what deal you negotiate with the company selling the scheme, but it seems plausible that you could end up paying 50% + VAT of the SDLT you would have paid to the company running this scheme; a year or more later you could then get HMRC trying to bill you for the unpaid tax + interest + possible fine. The scheme may or may not be one that will stand up in court - but how would you manage with long wrangles with HMRC? HMRC might also look at your other tax affairs - I'm sure everything's in order, but this can be a pain regardless :eek:

The company selling this scheme may claim that it is risk-free - for example, that you will only pay their fees if you 'succeed' in not getting charged SDLT for 9 months. However, are the company offering the scheme certain enough of this to indemnify you against any future charges that HMRC land you with as a result of the scheme (with appropriate arrangements in place in case the company goes bust)?

One more thing to think about - is the solicitor you'll be using for the scheme a good one to use for conveyancing? A bad conveyancing solicitor can cost you lots of money and the stress caused can be horrific!

Middlers

I recently sold my house and our buyers were using this scheme although the solicitor they used was pretty useless on the conveyancing side (as above). Being interested in saving money I enquired what the process was and below is the information sent - I decided against this purely as it seemed alot of hassle:

Feel free to fill out the letter of intent (no obligation/cost to proceed) and your solicitor will need to sign an NDA to receive further details.

Our role is their marketing partner to find suitable introductory sources, i.e. accountants, solicitors, IFA’s where the majority (all) of the business comes from.

Please find below and attached some information about the planning which will hopefully be of interest. In summary, the fee charged to the client for the planning is 2% plus VAT on cases of £500k and above / in the 4% band, so the easiest way to position it is that if the client is involved in a purchase at £1mln, if he or she did nothing they would pay the Treasury £40,000. If they elected to run our planning they would pay us a fee of £20,000 plus VAT resulting in a net saving to them of £17,000. At the point of completion the 4% SDLT would be paid into the solicitor’s client account in the normal way. Our advising solicitor would then complete the SDLT1 return and upon receipt of the SDLT5 from the stamp office, the rebate of £17,000 would be paid to the client from the solicitor’s client account.

In order to receive a full briefing document to the strategies, you will need to sign an NDA. Please let me know and I will send one across for your attention.

As discussed, the planning is supported by one of the country’s leading legal counsel and is disclosed to HMRC and has thus been allocateda corresponding scheme disclosure number. Our principal channel to market is via accountants as you may know. Upon sending the NDA, I can attach a letter from a UK firm of accountants, in fact the largest association of Accountancy firms in Europe ,endorsing the planning.

Highlights of the Planning


1). The SDLT strategy has been running for over 4 years.

2). In excess of 1000 cases have been successfully completed.

3). The planning is backed by a robust Counsel’s Opinion given by a leading Tax Counsel from Lincolns Inn Tax Chambers.

4). The planning has been disclosed to HMRC and has a corresponding scheme disclosure number ensuring that it is fully compliant with HMRC requirements for tax planning.

5). The structure has been queried on only a few occasions by the Inland Revenue who were promptly and easily satisfied that there is a legal loophole for reducing stamp duty.

6). The strategy is currently being marketed via 1500 firms of Chartered Accountants, the board of which ran the planning themselves as part of their process of due diligence in respect of their own commercial purchase.

7). The structure will save property buyers in the region of 50% of the SDLT. The total fee to the client is 2% plus VAT which includes SDLT and any associated fees apart from conveyancing.

8). So confident are we of the scheme’s integrity that we offer a ‘no-win-no-fee’ undertaking, via which all fees are fully refunded to the client in the event of a successful challenge by HMRC.

9). As well as the Chartered Accountancy Networks, the planning is used by Estate Agents, House Builders, Land Buyers, Property Lawyers, Commercial Conveyancers and others to enable their clients to mitigate stamp duty.

10). The scheme is deemed to be low risk and non-aggressive and does not involve either the vendor or the lending institution involved in the transaction or effect either their title, security or ability to realise funds from the sale of the property.

11). References are available, on a confidential basis, from individuals who have successfully run the planning and from Chartered Accountancy firms who have referred clients and who, based on the results, continue to refer clients.

12). Experienced panel solicitors are on hand to ensure the seamless implementation of the planning and conveyancing at a very cost effective rate.

13). The planning has been run in conjunction with a variety of lenders in the UK and was approved by a major UK prime bank late 2006.

JasonLVC

The fact that the scheme has been disclosed to HMRC means that HMRC consider the scheme falls under anti-avoidance legislation, the legisaltion dictates that contrived schemes known to HMRC must be disclosed to them. That is different to saying HMRC approve of it.

Disclosure of the scheme method to HMRC means HMRC can request a list of the clients from the provider who are using that scheme and so you are not 'off the radar' as such but your details are not directly provided to HMRC straight away either.

SDLT is a self-assessed tax so the solicitor submits the forms to HMRC with whatever figures on and HMRC will accept that as given....HMRC may then perform a case review sometime in the future (4+ years into the future) at which point they may then discover the transaction and enquire further.

Under the new penalty regime which SDLT comes under, deliberate wrongdoing and concealed wrongdoings are subject to penalties of upto 100% of the tax unpaid - so whilst the blurb may states they may refund you your 'fee' they don;t mention anything about the 100% penalty and interest charges being refunded to you.....so it is clearly NOT as risk free as they are suggesting.

So some of these schemes do work, but they are complicated and contrived and as such, open to attack from HMRC. How contrived the scheme is will determine how successful HMRC are at attacking it. If you enjoy risks then go for it - some people are like that and happy to dodge, duck and weave on stuff, if you are a non-risk taker then don't go for it at all.

Personally, I dislike any scheme which is contrived or designed solely to avoid taxation. If there is another genuine purpose for a transaction then fair enough, but a string of transactions whose sole purpose is to avoid tax is just wrong (and at the very least disqualifies anyone from moaning about MP's expenses, benefit scroungers and EU corruption).

Evilm

It doesn't sound good - It might look like an upfront saving but I would expect backlash at a future date at which point you may not have the available funds to pay the fines assessed (let alone end up paying more than you would have originally).

skintchick

Thanks everyone. We decided last night not to do it and to use a local solicitor instead.

timmyt

DON'T.

They are designed for £800k properties, and even then you do not get charged until you have got it through the Revenue for 12 months I beleieve. That is the window for them to investigate. Many have failed, and it is not worth it at all.

skintchick

I think they can be used for cheaper properties too, but ultimately I felt uneasy with the morals of it all, and would prefer to use a good local solicitor who I know is good at conveyancing, especially as we want to move very quickly in order to satisfy our chain.

I'm so excited - we've been looking since October and nearly lost our buyer, then we got told about something not even on the market yet and it is perfect We feel like Phil and Kirstie :rotfl:

DarrenTMH

Hi all

there is an existing thread on this subject, it's almost 4 years old now and 3 pages long. I posted a comment on page 3 which is pretty comprehensive on the subject which may be of interest to you. You can find it by clicking on my pic and looking at my previous posts in the 'statistics' tab.

best regards