Avoiding stamp duty?

JasonLVC

I think at the end of the day, any kind of tax avoidance scheme will have to be entered into on the basis that it may not work or may work but may be identified at a later stage.

The 9 months thing is the period of time to submit and pay the approprate paperwork and SDLT to HMRC. The 6 years is the period of time HMRC have to open an investigation into any individuals tax affairs so arguably you could pull off the SDLT scheme no problem but then get caught out in a random tax review 5-6 years later down the line.

It'll depend upon your tax affairs (or your parents), if they have complex affairs - Directorships and different income sources, they'll be of more interest to HMRC anyway than a bloke with a job on PAYE trying to dodge a bit of SDLT.

There are variations of the these schemes, some more convuluted than others. If they work, then fine. If they are caught by HMRC then the individual is subject to large penalties of upto 100% of the original tax dodged (plus the tax dodged as well of course) and so the more complex the dodge, the higher the penalty and risk.

Personally, I don't like or advise upon SDLT avoidance schemes becuase they are contrived and serve only one purpose, to avoid tax. Tax planning is different as it works within the law in realistic scenarios but where you have to sell property to third parties and make multiple transfers then you know it is wrong and will fail becuase this is not a 'natural' transaction scenario.

So to end, it is not for me to say don't do it, each and to their own. What you can do is highlight the potential risks and the potential benefits and then let them decide for themselves as only they can determine if they are happy to live with the risks - some people can and some cannot.

1000TPM

After reading through most replies in this forums I paint the picture and ask the question.

I have received an offer on a luxury 1 bed room apartment in Manchester for the price of £249,999 + £11k for the Fixtures & Fittings the property was on the market for £275k.

Most of these apartments are furnished with thousands and thousands of pounds as the apartments vary from £250,000 - £3,000,000 and occupied by very high earners.

I however furnished the apartment with low cost furnishings that give the impression that they are very expensive. Most apartments the same size as mine have paid well over the £11k to furnish them...mine just looks like it....but can I still charge what I want for the good if they are prepared to pay it.

After now reading the words tax avoidance and tax evasion, I can see why the buyer is prepared to pay over the odds if he is saving on tax, so in this scenario is anyone in the wrong for this transaction?

JasonLVC

So are you saying that the buyer is offering to pay you £11k for the fixture and fittings but the TRUE value of those fixtures and fittings is nearer £1-2K?

SDLT is only payable on the house value.

Fixtures and fittings are no longer seperable for SDLT purposes so these cannot be seperated out from the 'house' price. Fixtures and fittings are not easily removed such as fitted kitchen cupboards, fitted wardrobes or fitted whitegoods (dishwashers, etc), boilers and that sort of stuff.

Chattels are not fixtures and fittings. Chattels are stuff that can be easily removed such as carpets, sofas/beds, light shades/fittings and free-standing white goods such as a washing machine in the larder.

So seperate out what are fixtures and fittings first.

HMRC would expect the valuation of the chattels to be based on their second hand value, so there is some room for fudging it a little. As SDLT is a self-assessed tax (and becuase your lawyer should be acting to protect you at all time), you may want to seek a seperate valuation to validate your claim that the loose stuff is worth £11k.

But if the fixtures are worth £1,000 becuase as you said you put the cheapest stuff you could find in, and you're asking for £11k off the buyer then you are very much in the realms of SDLT avoidance - by going 'cheap' on the fixtures you're going to find it harder to justify the £11k.

Whether HMRC will spot this is anyone's guess but they do take an interest in any property sales that hover over the cusp of SDLT thresholds such as £249k house sales.

1000TPM

Thanks Jason

I have probably confused you a little if what you say is right.

The buyer has said he will pay for fittings and fixtures and I assumed this was all my furniture, bed, linen, cutlery, crockery freestanding appliances that were being left as I no longer need them for my new property that I said I would leave as I don’t really need it, and I would say although they look more expensive and passed as such they are only about 2k.

If you are saying fixtures and fittings are fixed items like kitchen, bathroom and fitted wardrobes then these items are worth over £25k.

any further help?

Paul

JasonLVC

I think you understand it and I think I've got the gist of your query. Its just important to make sure that all parties in the deal understand the terminology becuase one mans fixture is another man chattel!.

The 'fixed' stuff like kitchens cannot be bought seperate from the house as they are part of the house (that's why its important to understand the difference between fixtures/fitting and chattels).

So if you've agreed a price for the house of £249,999 then that is the price for the bricks/windows (the house) and the fixed stuff like central heating, radiators, fitted wardrobes and fitted kitchen.

The other non-fixed stuff (chattels) like linen, cutlery, beds, lights and bean bag sofa or whatever is fashionable these days (!) can be sold seperate and not subject to SDLT and you have agreed a price of £11k for these things.

If that is what they are worth then fine, but if they are worth £2k ish but you are charging £11k to the buyer for these soft furnishings then that is where you are at risk should (and its a low chance they'll pick you out in terms of risk) HMRC investigate your sale in more depth, you'll struggle to justify the £11k you charged for a few pillowcases and stuff.

So that's not to say "Don't do it", more a case of carry on as you were but be aware that whilst the concept of splitting up the sale to avoid SDLT is fairly easy, it is not without some risk, but then life is all about risks isn' it?.

1000TPM

Hi Jason

Many thanks for your help I now have a fair understanding. - So if my transaction was to go through, who would potentially be in the wrong for the avoidance of SDLT, me for selling the property effectively broken in to 2 lots or the purchaser for buying it into lots as it is him that saves on not paying the higher amount SDLT...I don’t gain anything, either way I get the same money; £249,999 + £11,000 or just £260,999.

I just don’t want to put myself at risk for someone else’s potential gain?

DarrenTMH

Hello everyone, I've got some info I can share on the subject of the title of this thread 'Avoiding stamp duty' and some of the related key aspects of the resultant conversation, if it's helpful for you?

If I stray from the etiquette required in posting info here on this forum please be gentle with me, I don't like the idea of being trashed like Gareth C. Norris was when he came in here!

With the above in mind, some info/disclosure on me first:

• I have a financial interest in completing SDLT planning for my clients.
• I am real! - searches on my company name (which I have not disclosed here but just in case any detectives find it), my forum name and my real name will bring up loads of relevant results in any search engines.

I'm not sure how to get past the fact that my ability to post the following information comes directly from my commercial activity in this area, a fact that some would say prohibits me from posting on the subject as to do so would be deemed advertising, yet to observe this view and choose not to post would deny the OP and others in the thread the benefit of the information I have available to share and which has been specifically requested.

So in sharing this information I'll request that even if after reading it you decide that SDLT planning is something you'd like to undertake, please don't seek me out and ask me to provide SDLT planning services for you, as to do so would validate any post by me on the subject as a form of advertising thereby placing me in breach of the forum rules.

So, here's a bunch of info covering my take on this subject from my own involvement in this area that I think will be of interest and relevance to the participants in this thread:

Is it legal?

Well, it depends on the method used. I've come across plenty of dodgy schemes which in my opinion are a fine waiting to happen if not worse. By contrast, there are plenty of schemes (we have 13 different schemes) which have been carefully constructed with the benefit of time, experience and considerable expense to be effective within the boundaries of the law.

Tax evasion is the term which describes evading the payment of taxes which you are liable to pay. If you are caught undertaking tax evasion you will face fines and/or imprisonment.

Tax avoidance the term which describes the use of any legal method to pay less in tax than might otherwise be the case. Tax avoidance is perfectly legal (the clue is in the description), but there can occasionally be confusion between this term and the non-legal tax evasion which has given rise to yet another phrase:

Tax planning - just another name for tax avoidance, increasingly used to prevent potential confusion with tax evasion.

Tax avoidance/planning has been long established as legitimate in UK law, Lord Tomlin stated in the case of IRC vs Duke of Westminster (1936) 19 TC 490 - every man is entitled, if he can, to order his affairs so that the tax attaching under the appropriate Acts is less than it otherwise would be.

If a SDLT planning scheme has the support of leading and respected Counsel and has been notified to and pre-approved by HMRC (as our schemes have) then one may quite rightly rely upon these aspects to gain a significant degree of comfort in it's use.

Our schemes' supporting counsel are:

Reg Nock - generally acknowledged as the authority on SDLT law, Reg was Called to the Bar having served his scholarship under the guidance of tax boffin John Munroe with whom he co-authored on what is regarded as the definitive book on stamp duty. Working as a barrister for the next 20 years, Nock built up a reputation as being the leading expert on tax law, specifically stamp duty before moving on in 1989 to head up tax departments at Deloitte & Touche and later Eversheds.

Patrick Cannon - Admitted as a Solicitor in 1984 and Called to the Bar in 2003. Specialising in all aspects of taxation advice and advocacy with an emphasis on stamp duty land tax and related real estate corporate tax and VAT issues plus stamp duties and stamp duty reserve tax.

Rory Mullan - Called to the Bar in 2000, Rory specialises in resolving disputes with HMRC, providing an objective, detailed and realistic analysis of the correctness of the HMRC approach and the prospects of successfully challenging it. Rory also advises on the the appropriate response to objections raised by the Revenue authorities and provides representation in litigation.

If you have a proper think about it, for such highly respected, experienced and knowledgeable barristers as these to be instrumental in the formulation of such schemes and their ongoing development as the tax laws continue to develop, to give their support to these, and to be retained to defend any enquiry resulting from their use, one must conclude that the schemes are an entirely legitimate method of legal tax planning.

To suggest otherwise is to suggest that these recognised experts in their field know less about the subject than oneself, any such suggestions should be be considered in this context and judged accordingly.

Key Points on valid schemes

Schemes such as ours will benefit from the following key points, which you should look for in any scheme you may consider:

• No up-front fees - All fees are paid on successful completion of the case and certification received from Stamp Office at HMRC
• No-win-no-fee basis - No fee is payable if the purchase does not conclude
• You may use your own conveyancing solicitor provided they consent to and support your use of SDLT planning
• All monies are handled by the conveyancing solicitor
• No liaison with vendor’s solicitors is necessary
• There is no deterioration in the Lenders’ position
• Schemes notified to & pre-approved by HMRC
• 3,000+ cases processed and notified with no queries
• Schemes have Positive Counsel Opinion and support
• You may leave your SDLT funds (comprising our fees and your savings) in your conveyancing solicitor's client account bearing interest for your benefit exclusively until you are comfortable to instruct withdrawal of your savings and payment of fees

I hope that the information in this post has been helpful to the discussion and that I've not offended anyone with it.

misspino

This thread is obvioiulsy pretty old now but wanted to add my expeience as may be another way of approaching stamp duty and the removal of its sting!

Putting aside the fact that SD is calculated in such an bizarre way - would make so much sense to all to have same model as income tax and pay the rates on each band - one of the toughest things about it is having to then find another lump of cash on top of your deposit.

Things with LTVs are even harder now so we all want to put as much deposit down as possible rather than pay it in tax!

My situation was as a first time buyer, I had managed to scrape together a 10% deposit and having to fork out around £8k for stamp duty on top of this was probably going to mean taking out a short term loan, saving for another year or losing out on the mortgage offer.

I'd been looking at properties under £250k but none were exactly right. I found one for £280k which was the max I could go to with my deposit and mortgage. HOwever, I was stuffed with the stamp duty. To get round this I negotiated with the vendor for HIM to pay my stamp duty. I checked with HMRC and this is totally legal as they dont care WHO pays the stamp duty, as long as it is paid and the property is not undervalued to avoid it. This way, the value of the property was agreed at £280 and my mortgage paid the vendor this. As part of the exchange, he had to agree to pay my stamp duty (our solicitors easily arranged this).

So, I didnt avoid stamp duty being paid but I did avoid having to try and sacrifice part of my deposit (which is the dilemma the buyer is in right at the beginning of this post in 2006!!!!). This wont help you if you just want to avoid paying it on principle but it can help cash flow.

Just my tuppence worth...

FTBFun

As this old thread has been bumped I'd thought I'd point out that these SDLT Mitigation schemes are incredibly aggressive and IMO are likely to get HMRC knocking.

It's points like this:

Schemes notified to & pre-approved by HMRC

That get my goat - SDLT mitigation aren't "pre-approved" but rather disclosed to HMRC. There is no approval to their validity.

Bunch of charlatans IMO.

N79

FTBFun wrote: »

Bunch of charlatans IMO.

I rather agree with this.

As a serial tax avoider I must admit that stamp duty is the one tax that does have to paid in full as it is, in my view, not possible to avoid it. These schemes are very much on the border of avoiding and evasion - one blow from HMRC and they easily fall into the evasion camp. If significant numbers of people use them then the appropriate pressure will be applied.

(Although I can and do claim tax relief on the stamp duty, of course).