Legally avoid stamp duty? calling the detective dogs of PH!

[anonymous-user]

[redacted]

[rah1888]

Yep, all legal (for the moment anyway!)

I'm not 100% sure on the intricacies of how it works, but seem to remember it has something to do with placing the property being purchased in an off-shore company, which the buyer is a shareholder of, and the buyer grants themselves a lease.

I believe it can also be used to avoid CGT and inheritance tax.

As your link mentions it only really works for the more expensive homes, due to the cost of seeting up the scheme in the first place.

I'm sure one of the PH lawyers will be along who will be able to give a far better explanation!

[blindswelledrat]

It is another one of those grey areas.
FOr every person who says it is legal, there will be one that says it isn't.
People have gotten away with it so far.
The problem with it is that the companies that govern the scheme charge around ahlf of the saving.
SHould it come back to haunt you then you could end up paying it anyway, having already paid half of it in fees.

[markh1973]

Seems to revolve entirely around avoiding "substantial completion" of the property - usually triggered by passing 90% of the purchase price to the vendor. If it was as easy as they make it out to be then everyone would be doing it and having worked in big accountancy practices for the last 13 years none of the structures they were using were that one - there are others ways to avoid Stamp Duty Land Tax but none of the ones I saw were like this one. Doesn't mean to say it doesn't work but you have to bear in mind with all of these things that you self assess your SDLT liability and if HMRC discover something in the future that you should have told them then they might still want their money. Banks aren't always too keen on SDLT avoidance where there is a mortgage in place either.

Also wouldn't trust a professional website that uses the word "counsel" instead of "council" and talks about Stamp Duty savings - Stamp Duty was replaced many years ago by Stampt Duty Land Tax which whilst superficially the same was at a technical level very different.

[foz01]

HMRC can come after you for 10 years, so you may end up paying twice..

[blindswelledrat]

foz01 said:

HMRC can come after you for 10 years, so you may end up paying twice..

Not quite IIRC. In this scheme, by thier own rules, the Inland Revenue have 7 months to challenge it (the company declare the scheme at the time of exchange).
However, the rules also state that in exceptional circumstances or when something is not declared, then they can come back up to 20 years.
It is the vagueness in this latter statement which makes it too much of a risk.

[Pat H]

markh1973 said:

...wouldn't trust a professional website that uses the word "counsel" instead of "council"

They are referring to "counsel's opinion", ie that of a barrister. So they are correct.

But to be honest, I wouldn't use any of these online SDLT merchants anyway.

Any decent conveyancer will be familiar with how these schemes are supposed to work and will probably be able to set one up for you for a fraction of the cost that these online SDLT companies will charge.

Edited by Pat H on Monday 9th August 13:56

[markh1973]

Pat H said:

markh1973 said:

...wouldn't trust a professional website that uses the word "counsel" instead of "council"

They are referring to "counsel's opinion", ie that of a barrister. So they are correct.

Edited by Pat H on Monday 9th August 13:56

Having been to Counsel several times - you get what you pay for and as long as you phrase things right you get what you want - that isn't what they were referring to so they were incorrect, quote below:

"Protecting an elderly person's estate against the counsel and Inland Revenue.
This technique involves purchasing a Retirement Annuity Trust that will provide an income for the recipient and on death the monies left in the trust will pass to the beneficiaries free of Inheritance tax. "




Having posted that quote from their website they are also still referring to the Inland Revenue so they are hardly on the cutting edge of modern terminology.

Edited by markh1973 on Monday 9th August 14:31

[Pat H]

markh1973 said:

Pat H said:

markh1973 said:

...wouldn't trust a professional website that uses the word "counsel" instead of "council"

They are referring to "counsel's opinion", ie that of a barrister. So they are correct.

Having been to Counsel several times - you get what you pay for and as long as you phrase things right you get what you want - that isn't what they were referring to so they were incorrect, quote below:

"Protecting an elderly person's estate against the counsel and Inland Revenue.
This technique involves purchasing a Retirement Annuity Trust that will provide an income for the recipient and on death the monies left in the trust will pass to the beneficiaries free of Inheritance tax. "

Apologies, Mark.

I was looking at this bit....

"The planning is backed by a robust Counsel’s opinion given by a leading Tax Counsel from Gray’s Inn Tax Chambers."

We are both right.

And they are wrong.

[markh1973]

Didn't see that bit - to be honest an opinion from the Council would be worth as much as one from Counsel most of the time.

[SJobson]

markh1973 said:

Seems to revolve entirely around avoiding "substantial completion" of the property

Of the purchase, presumably. Well, that is flawed since it would prevent the 'buyer' moving in...

Nobody has gotten away with it, either, since it's a self-assessed tax. If you filled in your income tax return and deliberately understated your income, then paid only what was demanded, you'd get away with that too. Until you're investigated.

Funnily enough, all of the providers of this type of scheme require you to use their advisers, enter into a confidentiality agreement, etc. I would be most interested to know if the actual details of any of these schemes are available online anywhere. I suspect that by keeping matters quiet, the providers are staying off the radar a bit. Hard work when you're trying to promote your service.

Oh, and one other thing; Patrick Cannon QC is usually cited as having given counsel's opinion on one of these schemes. However, on his own website he states that it is unlikely that there it works: Clicky.

[poprock]

We avoided stamp duty on our flat by moving into a designated ‘deprived area’. That was a nice surprise, since we thought it was a perfectly nice part of town and had budgeted for the duty already.

[Pat H]

SJobson said:

Nobody has gotten away with it, either, since it's a self-assessed tax. If you filled in your income tax return and deliberately understated your income, then paid only what was demanded, you'd get away with that too. Until you're investigated.

The theory seems to be that full disclosure is provided to the HMRC at the time of the property transfer.

So you are not failing to disclose a taxable transaction.

And if HMRC fail to challenge or investigate within nine months then they are too late to claim the SDLT that would have been paid had the transaction been carried out conventially.

But don't shoot the messenger. I'm certainly not saying that this works, or that it doesn't.

I know of very experienced tax accountants who are confident that this currently works. And I also know of lawyers, conveyancers and others who regard it as little short of fraud.

You pay your money and you make your choice. But one thing's for sure, I wouldn't hand over up to 50% of the anticipated SDLT savings to one of these outfits.

[SJobson]

Pat H said:

You pay your money and you make your choice. But one thing's for sure, I wouldn't hand over up to 50% of the anticipated SDLT savings to one of these outfits.

I don't think I've seen any of the providers quoting less than 50%+VAT, so you'd be handing over more than half