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Hmrc Eyes Clamping Down On Stamp Duty Mitigation Schemes

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Pay your taxes already

Mortgage advisers have warned that lenders are becoming more cautious of stamp duty mitigation schemes amid rumours that HM Revenue & Customs is looking to clamp down on the tax planning tool.

Ray Boulger, senior technical manager of London-based John Charcol, said HMRC had stepped up the monitoring of the schemes, mainly used by high net-worth individuals, as part of its scrutiny of tax avoidance.

Mr Boulger said: “We have some clients who are aware of the scheme and want to use it, although it only works on high-value properties as the fees the solicitors charge are relatively high.

“Some lenders now have issues with it, whereas until a few months ago most did not have a problem with it.

“There is a greater concern that HMRC will be paying attention to it as it clamps down on tax as part of the Spending Review.”

There are different types of stamp-duty mitigation schemes and all must be approved by HMRC. One scheme often used in Sharia law under alternative finance rules, involves an organisation purchasing the property on behalf of the buyer who then completes the sale with gradual repayments rather than paying interest.

Recent schemes involve setting up a special purpose vehicle company, onshore or offshore, to buy the property and, once the sale is complete, the freehold is transferred or the company taken over.

A spokesman for the Council of Mortgage Lenders said: “These types of schemes are relevant only to a niche market and it is unlikely that most mainstream lenders will accept such arrangements on their mortgage business. In the private client and high net-worth market, private banks will be assessing cases both for their own regulatory compliance and for their business risk.”

An HMRC spokesman said: “We are aware that a number of stamp duty land tax avoidance schemes are being marketed to individuals buying residential property. HMRC is addressing the risks posed by these schemes, using its inquiry powers to investigate their use. In general the schemes rely on an interpretation of SDLT law that produces an outcome different from that envisaged when the law was enacted and that HMRC does not accept. HMRC is challenging such schemes and will argue its view of the law through the courts, as necessary.

“In the June Budget, the chancellor announced the government will examine whether changes to the SDLT rules on high value property transactions are needed to prevent avoidance in this area. This examination is ongoing.”

Gee. What you can't do with a lawyer eh....

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