High Court throws out stamp duty avoidance challenge

Measures to block abuse of ‘transfer of rights’ rules expected to bring in more than £160m, taxman says.

The High Court has rejected an attempt to bring a judicial review to challenge legislation introduced to tackle stamp duty land duty avoidance, which the tax authority believes could raise up to £160m.

Retrospective legislation was announced in June 2013 to halt the ‘Blackfriars avoidance scheme’, which abused the stamp duty ‘transfer of rights’ rules to avoid paying stamp duty on UK property purchases.

This follows on from a 2012 consultation launched by HMRC to tackle stamp duty tax avoidance by closing the perceived loophole, which involves a property being purchased by one party and immediately passed on to another before completion.

Some schemes had claimed no stamp duty is payable as the initial transaction is disregarded in line with the transfer of rights rules, while there was no consideration paid for the distribution of the property thereafter.

In court, the claimants sought to challenge the retrospective legislation by judicial review.

The High Court refused permission, backing HM Revenue and Customs and HM Treasury’s argument that “parliament was entitled to decide that this was a case in which there was justification for making the legislation retrospective”.

High Court Judge Justice Andrews also concluded that “anyone in the claimants’ position who entered into the Blackfriars scheme did so at their own risk”.

Overall, the measures introduced to block abuse of the transfer of rights rules are expected to result in additional stamp duty of over £160m being collected for the public purse between 2013 and 2018, HMRC said.