Failure of SDLT Mitigation Scheme - help please?

girlclaire771

We bought our current home in January 2011 and were just about able to afford to do so with the help of a Stamp Duty Land Tax Mitigation Scheme recommended to us by our Mortgage broker and provided by Inventive Tax Strategies Ltd.
Wary at first of what the scheme offered, the explanation we received was that the scheme essentially was designed to exploit the existing legislation and NOT to break any law. In any event, we were informed of the following by ITS Ltd:

• The scheme was insured so that, should it fail, we would be reimbursed both their fee for provision of the scheme and the effective SDLT saving afforded by the scheme (totalling just over £8000)
• HMRC would have only a 9 month window to contest the validity of the scheme so that, outside of that period, we would risk no further liability.

The position now is:

• The scheme is deemed to have failed
• ITS Ltd is in administration
• HMRC is now offering a ‘settlement opportunity’, agreed with the administrators of ITS Ltd. Their offer is that, should we pay what they consider to be the outstanding tax and interest, they will agree not to seek penalties. (HMRC has set a deadline of 30th April to accept the settlement opportunity)
• The administrators of ITS Ltd say that no valid insurance appears to have been in force to cover the failure of the scheme, whether inside or outside of the 9 month window. Furthermore, such insurance could not have covered retrospective legislative changes

It looks to me as if we have no choice but to repay all tax and interest in full to HMRC in the light of retrospective changes to the law. I certainly cannot afford legal costs to contest such a position. I understand at any rate that Tax Counsel has recently given negative advice to the administrators in respect of the prospects of contesting HMRC’s position.
As a result, I will have to try to obtain a loan of around £15000, more than £8000 of which constitutes monies paid to ITS Ltd for provision of the (failed) scheme and possibly £1000 of which is interest accrued.
I know I am one of many thousands of people in a similar position and find it extremely unfair that we should be penalised by HMRC moving the legal goalposts.
I would be very interested in your opinion on this and to receive any advice you might have.

princeofpounds

I certainly cannot afford legal costs to contest such a position.

You can't anyway. It is within HMRC's remit to decide these matters.

I know I am one of many thousands of people in a similar position and find it extremely unfair that we should be penalised by HMRC moving the legal goalposts.

They didn't. You tried to hit the ball without there being any goalposts on the pitch. So it's not surprising you ended up with an own goal.

Your anger should probably be directed at your advisors and yourself, not HMRC.

girlclaire771

We are not talking about a moral or ethical issue here but a legal one - we were advised that legally it was a viable scheme. Unfortunately the company that gave us that advice no longer exists. The law has been changed retrospectively. We were playing by the rules, the rules have now been changed. By the way I don't feel angry, I am resigned to this even if it means I am now forced to sell my house and move my family because of the poor advice of professionals. I hope that nobody else gets caught out like this. Thanks for your comments.

princeofpounds

we were advised that legally it was a viable scheme. Unfortunately the company that gave us that advice no longer exists. The law has been changed retrospectively.

Your advisor was wrong, and their guarantee was worthless.

The law didn't change. The regulations may have changed, but only from 'maybe' to 'no', not 'yes' to 'no'. It was never a yes.

mrginge

girlclaire771 wrote: »

We are not talking about a moral or ethical issue here but a legal one - we were advised that legally it was a viable scheme. Unfortunately the company that gave us that advice no longer exists. The law has been changed retrospectively. We were playing by the rules, the rules have now been changed. By the way I don't feel angry, I am resigned to this even if it means I am now forced to sell my house and move my family because of the poor advice of professionals. I hope that nobody else gets caught out like this. Thanks for your comments.

Was the company giving you the advice the same one that sold you this scheme :rotfl:

Did you get any independent legal advice on this scheme?

mjdh1957

I seem to recall several threads on here in the past asking about the workings of such schemes.

The advice given on here was that they were likely to fail and when they did the stamp duty would be payable.

Did you search for any alternative advice before you committed yourself to this legally-dubious scheme?

System

The issue here isn't retrospective change. Cowboys like ITS as well as many other regulated firms were given a warning over these schemes before the retrospective change. Many respectable firms knew that the warning meant if they continued Osbourne would do exactly as he has done so they pulled out - saving themselves first and by default any potential clients. Cowboys like ITS continued which is why the treatment was so heavy handed by HMRC in the retrospective change.


I would honestly say that you are probably getting a good deal under this settlement. For all intents and purposes what you did was tax evasion and they could come down on you like a ton of bricks but they haven't.

anselld

girlclaire771 wrote: »

We are not talking about a moral or ethical issue here

I think we are. Morally and ethically you should have paid SDLT

girlclaire771 wrote: »

but a legal one -

... and legally you should have paid SDLT.

Better late than never!

harrys_dad

I have some sympathy for you, in that you now have to pay stamp duty that you were "legally advised" you did not have to pay. Clearly however the advice "if it looks too good to be true it isn't true" applies here.

If there was a legally foolproof way of avoiding paying stamp duty (or any other tax) everyone would use it and the Govt would then of course take action to obtain the lost tax in some other way (or cut services even more than they are being hacked to bits now). believe it or not, and many do not realise or accept this, it is impossible to have decent public services without paying some sort of tax.

Your gripe should be with the people who "advised" you (presumably they got commission from ITS?) and yourself for being so gullible as to believe worthless promises.

ethank

You can't argue that you don't owe the money, so you are left with the position that you can only accept liability. I would contact HMRC and say you don't have the money to pay it and to set up a payment plan. They cannot force you to take on debt to repay it.

Separately if your mortgage broker recommended you join this scheme - but you need to check your documentation, I doubt very much that they would make such a recommendation.

AdrianC

"Inventive Tax Strategies Ltd"...?

And that name didn't make you run a mile?